Today we're going to take a closer look at large-cap Utilities company Energy Transfer LP, whose shares are currently trading at $12.71. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Energy Transfer LP provides energy-related services. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 22.89 and an average price to book (P/B) ratio of 1.03. In contrast, Energy Transfer LP has a trailing 12 month P/E ratio of 9.1 and a P/B ratio of 1.5.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
When we divide Energy Transfer LP's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -2.0. Since it's negative, the company actually has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.