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Comparing Energy Transfer’s Valuations to Its Peers’

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Valuation

Energy Transfer (ET) stock is currently trading at a forward EV-to-EBITDA (enterprise value-to-EBITDA) multiple of 12x based on its expected 2019 earnings. Its five-year historical average valuation is over 16x. The peer average forward EV-to-EBITDA multiple is close to 10x.

Thus, Energy Transfer stock seems to be trading at a premium valuation to its peers, and it seems inexpensive compared to its historical average.

ET stk

Enterprise Products Partners (EPD) and Kinder Morgan (KMI) are trading at forward EV-to-EBITDA multiples of 11.4x and 9.7x, respectively. Cheniere Energy (LNG) is trading at a multiple of 14x.

The chart above shows the comparative stock price movements of Energy Transfer and the Alerian MLP ETF (AMLP) along with the broader markets. So far this year, ET has fallen almost 12%, mirroring the market movement of MLPs at large. In the same period, broader markets are up ~2%.

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Distributions

Energy Transfer declared a distribution of $0.305 per unit on October 29. This represented an annualized distribution of $1.22 and a forward yield of 7.9%. This distribution was the first since Energy Transfer Partners and Energy Transfer Equity merged on October 19.

Let’s see where Energy Transfer stock could go from here.

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