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Cheniere Energy’s Valuation before Its Q4 Earnings

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Valuation

Cheniere Energy (LNG) stock rallied ~13% in the last 12 months. The stock is trading at a forward EV-to-EBITDA multiple of 13.5x based on its projected earnings for the next 12 months. Peers’ average forward valuation is close to ~12x. So, Cheniere Energy stock appears relatively expensive compared to its peers. However, the company’s earnings are expected to increase ~30% in 2019, according to the estimates. Cheniere Energy’s valuation is higher than many of its peers. The company’s healthy earnings growth likely justifies the premium valuation.

LNG stk

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Peers’ valuation

Williams Companies (WMB) stock is trading at a forward EV-to-EBITDA multiple of 11x based on its estimated earnings. The company’s five-year historical average multiple is ~18x. Williams Companies looks cheap compared to those multiples and its historical average. Kinder Morgan (KMI) is trading at a valuation multiple close to 10x, which is lower than the industry average.

Cheniere Energy Partners (CQP) offers a distribution yield of 5.4%, which is higher than Kinder Morgan’s yield of 4.2%. Williams Companies is trading at a yield of 5.5%.

The above chart compares the stock price movements for Cheniere Energy with the Global X MLP and Infrastructure ETF (MLPX) and broader markets. Cheniere accounts for 7% of MLPX, while Kinder Morgan (KMI) and Williams Companies (WMB) account for almost 9% and 8%, respectively.

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