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Energy Transfer Stock Offers Good Upside Potential

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Energy Transfer

Based on Wall Street analysts’ consensus estimates, Energy Transfer (ET) stock has a target price of $20.83 compared to its current market price of $15.43, which suggests upside potential of ~35% over the next 12 months.

Among the 19 analysts covering Energy Transfer stock, nine recommended a “strong buy,” eight recommended a “buy,” and two recommended a “hold.” None of the analysts recommended a “sell” as of April 11.

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Distribution yield

Energy Transfer is trading at a distribution yield of 7.9%, which is higher than its five-year average yield. The Alerian MLP ETF (AMLP) is trading at a yield of 8.1%. Energy Transfer raised its distribution 13.4% compounded annually in the last five years—higher than many of its peers. Energy Transfer stock offers a solid total return potential given the potential upside based on analysts’ estimates and its current yield.

Energy Transfer stock is trading at an EV-to-EBITDA multiple of 9x, which is lower than its peers’ average. Analysts expect Energy Transfer’s solid earnings growth to continue this year, which likely justifies its current valuation.

Williams Companies (WMB) is trading at a valuation of 11x, which is higher than Energy Transfer. Williams Companies offers a yield of 5.3%. According to analysts, Williams Companies has a target price of $32.0, which implies an estimated upside of 12% for the next 12 months.

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