Why Does Enbridge (ENB) Have a Good Analyst Rating?

Enbridge may be overvalued with poor growth indicators, but the 7 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $40.09 to $47.38 per share, for an average of $43.45. At today's price of $36.73, Enbridge is trading -15.47% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Enbridge Inc. is an energy infrastructure company. The large-cap Energy company is based in Calgary, AB. Enbridge has offered a 7.0% dividend yield over the last 12 months.

Enbridge has a trailing twelve month P/E ratio of 39.92, compared to an average of 7.54 for the Energy sector. Based on its EPS guidance of 2.19, the company has a forward P/E ratio of 16.77. Based on the 27.4% average annual growth rate of Enbridge's historical and projected earnings per share, the company's PEG ratio is 1.46. This EPS growth rate is likely not sustainable, so will substitute the broader market's 5-year projected EPS growth rate of 13.05%, which gives us a PEG ratio of 3.06. This suggests that these shares are overvalued.

Furthermore, Enbridge is likely overvalued compared to its book value, since its P/B ratio of 1.889 is higher than the sector average of 1.68. The company's shares are currently trading 4.61% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows and high dividend. Enbridge's decent EPS growth rate of 22.25% is another positive point. We note, however, that the expected growth rate implied by its P/E ratio is significantly higher, at 40.0%.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $50,069 $39,087 $47,071 $53,309
Revenue Growth n/a -21.93% 20.43% 13.25%
Gross Margins 38.08% 47.12% 39.02% 38.87%
Gross Margins Growth n/a 23.74% -17.19% -0.38%
Operating Margins 16.5% 20.36% 16.58% 9.71%
Operating Margins Growth n/a 23.39% -18.57% -41.44%
Net Margins 11.39% 8.6% 13.15% 5.63%
Net Margins Growth n/a -24.5% 52.91% -57.19%
Earnings Per Share $2.82 $1.66 $3.05 $1.48
EPS Growth n/a -41.13% 83.73% -51.48%
Diluted Shares (MM) 2,025 2,026 2,026 2,025
Free Cash Flow (MM) $3,706 $4,161 $1,163 $6,409
FCF Growth n/a 12.28% -72.05% 451.07%
Capital Expenditures (MM) $5,692 $5,620 $8,093 $4,821
Net Debt / EBITDA 6.15 9.14 7.07 9.66
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.