Williams Companies Has the Lowest Valuation among Its Peers


Dec. 18 2017, Updated 10:32 a.m. ET

Relative valuation

So far in this series, we’ve analyzed the four selected peers, Energy Transfer Equity (ETE), Plains GP Holdings (PAGP), Western Gas Equity Partners (WGP), and Williams Companies (WMB), based on their organizational structure, market performance, financial performance, distribution yield, and financial position. In this article, we’ll perform a valuation analysis of the four peers.

Williams Companies currently has the lowest forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple among the selected peers. WMB was trading at a forward EV-to-EBITDA multiple of 10.9x as of December 12, 2017. WMB’s low valuation relative to its peers might indicate a buying opportunity, considering its significant natural gas–focused expansion opportunities, low crude oil exposure, strong presence in the prolific Marcellus and Utica basins, and improved financial position.

Western Gas Equity Partners currently has the highest forward EV-to-EBITDA multiple among the selected peers. It was trading at a forward EV-to-EBITDA of 14.2x as of December 12, which might reflect WGP’s low leverage and strong distribution growth guidance.

Plains GP Holdings (PAGP) and Energy Transfer Equity (ETE) are both trading at a valuation multiple of 11.6x, which is below the peer average (12.1x). ETE’s and PAGP’s low valuation might reflect their relatively high crude oil exposure and leverage.

All four peers are trading below their historical averages. In the next part of this series, we’ll look into the technical indicators for the four select peers.

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