Valuation

Energy Transfer (ET) stock seems to be trading at a discounted valuation compared to its five-year historical average. The stock is trading at a forward enterprise value-to-EBITDA multiple of 11x based on the estimated earnings for the next year. Energy Transfer’s historical average valuation is near 16x. Peers’ average valuation is close to 10x. So, the stock looks expensive compared to its peers. However, Energy Transfer’s strong expected growth above 13% next year likely justifies the premium valuation.

Analyzing Energy Transfer’s Valuation Compared to Its Peers

The above chart compares the stock price movements for Energy Transfer and the Alerian MLP ETF (AMLP) with broader markets. Energy Transfer has been weak due to weakness in crude oil prices. So far in 2018, Energy Transfer has fallen more than 16%. AMLP has fallen 13%, while broader markets have risen marginally year-to-date.

Enterprise Products Partners (EPD) and Kinder Morgan (KMI) are trading at forward EV-to-EBITDA multiples of 11.2x and 9.6x, respectively.

Distribution

Energy Transfer paid a per unit distribution of $0.305 for the third quarter. Currently, the stock is trading at a distribution yield of 8.3%, which is higher than AMLP’s current yield of 8.1%. Enterprise Products Partners and Kinder Morgan are trading at yields of 6.6% and 4.8%, respectively.

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