Williams Companies (WMB) stock is trading at a forward EV-to-EBITDA multiple of 11x based on its estimated earnings for the next 12 months. The company’s five-year historical average multiple is ~18x. Since peers’ average forward EV-to-EBITDA multiple is close to ~11.5x, Williams Companies stock and the historical average look cheap. Analysts expect Williams Companies’ earnings to grow ~9% in 2019—higher than many of its peers.
The chart above compares the stock movements for Williams Companies, the energy sector, and broader markets. Williams Companies stock has fallen 10% in the past year, while the Energy Select Sector SPDR ETF (XLE) has fallen 8%.
Energy Transfer (ET) stock, with a forward EV-to-EBITDA multiple of 11x, seems to be trading at a fair valuation compared to its peers. Energy Transfer appears to be attractively valued given its estimated 2019 earnings growth of ~14%. Enterprise Products Partners (EPD) and Kinder Morgan’s (KMI) forward EV-to-EBITDA multiples are 11.8x and 9.7x, respectively. Analysts expect their earnings to grow 3% and 2% in 2019, respectively.
These midstream stocks might seem expensive considering their relatively lower earnings growth compared to broader markets. However, their solid dividend yields likely make them attractive bets.
Next, we’ll discuss Williams Companies’ chart indicators.