KMI

What Should You Know About Kinder Morgan (KMI)?

We've been asking ourselves recently if the market has placed a fair valuation on Kinder Morgan. Let's dive into some of the fundamental values of this large-cap Utilities company to determine if there might be an opportunity here for value-minded investors.

Kinder Morgan Is Reasonably Valued:

Kinder Morgan, Inc. operates as an energy infrastructure company in North America. 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, Kinder Morgan has a trailing 12 month P/E ratio of 15.6 and a P/B ratio of 1.26.

Kinder Morgan's PEG ratio is 51.23, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Exceptional Profitability Overshadowed by Excessive Leverage:

2018-02-09 2019-02-08 2020-02-12 2021-02-05 2022-02-07 2023-02-08
Revenue (MM) $13,705 $14,144 $13,209 $11,700 $16,610 $19,200
Gross Margins 68.0% 69.0% 75.0% 78.0% 61.0% 52.0%
Operating Margins 26% 28% 30% 30% 27% 21%
Net Margins 1.0% 11.0% 17.0% 1.0% 11.0% 13.0%
Net Income (MM) $183 $1,609 $2,190 $119 $1,784 $2,548
Net Interest Expense (MM) -$1,832 -$1,917 -$1,801 -$1,595 -$1,492 -$1,513
Depreciation & Amort. (MM) -$2,261 -$2,297 -$2,411 -$2,164 -$2,135 -$2,186
Earnings Per Share $0.01 $0.67 $0.97 $0.05 $0.79 $1.12
EPS Growth n/a 6600.0% 44.78% -94.85% 1480.0% 41.77%
Diluted Shares (MM) 2,230 2,216 2,264 2,263 2,267 2,265
Free Cash Flow (MM) $7,671 $7,843 $6,936 $5,188 $6,583 $6,582
Capital Expenditures (MM) -$3,070 -$2,800 -$2,188 -$638 -$875 -$1,615
Net Current Assets (MM) -$41,216 -$37,947 -$36,030 -$36,204 -$34,666 -$34,161
Long Term Debt (MM) $33,988 $33,105 $30,883 $30,838 $29,772 $28,288
Net Debt / EBITDA 6.3 5.31 5.09 5.7 4.69 4.97

Kinder Morgan has strong margins with a stable trend, exceptional EPS growth, and wider gross margins than its peer group. However, the firm has a highly leveraged balance sheet. Finally, we note that Kinder Morgan has weak revenue growth and a flat capital expenditure trend and irregular cash flows.

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.

IN FOCUS