8 Apr

What Does Enbridge’s Current Valuation Indicate?

WRITTEN BY Rekha Khandelwal, CFA

Enbridge’s valuation

Enbridge (ENB) is trading at a forward EV-to-EBITDA multiple of ~13.2x. The EV-to-EBITDA multiple is slightly lower than the company’s five-year average multiple of ~13.4x. The EV-to-EBITDA multiple is neutral to capital structure. The enterprise value takes into account a company’s debt and equity. A lower ratio indicates possible undervaluation.

What Does Enbridge’s Current Valuation Indicate?

As the above graph shows, Enbridge’s forward EV-to-EBITDA multiple is higher compared to TransCanada (TRP), Kinder Morgan (KMI), and Enterprise Products Partners (EPD).

Forward PE ratio

Enbridge’s forward PE ratio of ~19x is also higher than TransCanada and Enterprise Products Partners’ ratios. However, Enbridge’s PE ratio is lower than Kinder Morgan’s ratio of 20x.

Overall, Enbridge looks fairly valued based on its historical valuation and slightly overvalued compared to its peers. The stock might continue to trade at a premium compared to its peers due to its attractive risk-return metrics.

In terms of the yield, Enbridge offers the highest yield among the four selected stocks. So far, Enbridge has risen ~18% in 2019. Enbridge stock is trading above its 50-day and 200-day moving averages. Enbridge forms 3.9% of the First Trust North American Energy Infrastructure Fund (EMLP).

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