Today we're going to take a closer look at large-cap Utilities company Energy Transfer LP, whose shares are currently trading at $13.25. 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 Is Reasonably Priced:
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 17.53 and an average price to book (P/B) ratio of 1.71. In contrast, Energy Transfer LP has a trailing 12 month P/E ratio of 12.5 and a P/B ratio of 1.54.
P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. Energy Transfer LP's PEG ratio is 1.18, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.
As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.
The Company Has a Highly Leveraged Balance Sheet:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $54,087 | $54,213 | $38,954 | $67,417 | $89,876 | $78,555 |
| Revenue Growth | n/a | 0.23% | -28.15% | 73.07% | 33.31% | -12.6% |
| Operating Margins | 10% | 13% | 8% | 13% | 9% | 10% |
| Net Margins | 7% | 9% | 2% | 10% | 7% | 7% |
| Net Income (MM) | $3,630 | $4,899 | $739 | $6,871 | $6,072 | $5,465 |
| Net Interest Expense (MM) | $2,055 | $2,331 | $2,327 | $2,267 | $2,306 | $2,484 |
| Depreciation & Amort. (MM) | $2,859 | $3,147 | $3,678 | $3,817 | $4,164 | $4,287 |
| Diluted Shares (MM) | 1,461 | 2,638 | 2,696 | 2,740 | 3,097 | 3,214 |
| Free Cash Flow (MM) | $99 | $2,096 | $2,231 | $8,340 | $5,670 | $6,279 |
| Capital Expenditures (MM) | $7,407 | $5,960 | $5,130 | $2,822 | $3,381 | $3,318 |
| Current Ratio | 0.69 | 0.97 | 1.07 | 0.97 | 1.17 | 1.05 |
| Total Debt (MM) | $46,028 | $51,054 | $51,438 | $49,702 | $48,262 | $47,164 |
| Net Debt / EBITDA | 5.52 | 4.9 | 7.67 | 3.92 | 4.03 | 3.84 |
