Why Are People Buying EPD Shares?

By Chris Stiles • Thursday, November 10 12:00 • Permanent Link

One of the standouts of today's afternoon trading session was Enterprise Products Partners, which logged a 1.6% performance and outperformed the S&P 500 by -3.7%. The Oil & Gas Transportation and Processing stock is now trading at $24.88 per share and may still have upside potential because it is still -21.29% under its average target price of $31.61. Analysts have set target prices ranging from $28 to $36 dollars per share, and have given the stock an average rating of buy.

The market seems to share this rosy outlook, since Enterprise Products Partners has a short interest of only 1.4%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.

When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.

A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.

For what it's worth, institutions own 27.6% of Enterprise Products Partners's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.

In conclusion, we see mostly positive market sentiment regarding Enterprise Products Partners because of its an analyst consensus of strong upside potential, a buy rating, a very low short interest, and only a small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.

Here's a snapshot of some important facts to keep in mind about EPD:

The stock has trailing 12 month earnings per share (Eps) of $2.31
Enterprise Products Partners has a trailing 12 month Price to Earnings (P/E) ratio of 10.8 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 2.1 in contrast to the S&P 500's average ratio of 2.95
Enterprise Products Partners is a Energy company, and the sector average P/E and P/B ratios are 9.11 and 1.45 respectively

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.