Price-to-distributable cash flow
Energy Transfer Equity (ETE) was trading at a price-to-distributable cash flow of 17.5x on February 8, 2018. This figure was slightly below the trailing-ten-quarter average of 18.0x.
Energy Transfer Equity was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 11.4x on February 8, 2018, below its one-year historical average of 12.7x. However, it was trading above the peer median multiple of 10.2x. ETE’s C corporation peers Enbridge (ENB) and Kinder Morgan (KMI) are trading at multiples of 12.5x and 10.6x, respectively.
ETE’s high valuation relative to those of its peers may not be justified considering its high crude oil exposure and its weak financial position. At the same time, ETE’s current valuation could indicate a buying opportunity considering the strong cash flow growth it expects in the coming quarters. This growth is expected to come from distribution growth at Energy Transfer Partners (ETP), equity offerings at ETP, and the removal of incentive distribution rights subsidies.