Today we're going to take a closer look at large-cap Utilities company Enterprise Products Partners, whose shares are currently trading at $26.3. 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!
Enterprise Products Partners Is Reasonably Priced:
Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. 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, Enterprise Products Partners has a trailing 12 month P/E ratio of 10.7 and a P/B ratio of 2.1.
Enterprise Products Partners's PEG ratio is 1.75, 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.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $36,534 | $32,789 | $27,200 | $40,807 | $58,186 | $48,743 |
| Revenue Growth | n/a | -10.25% | -17.05% | 50.03% | 42.59% | -16.23% |
| Operating Margins | 15% | 19% | 19% | 15% | 12% | 14% |
| Net Margins | 12% | 14% | 14% | 12% | 10% | 11% |
| Net Income (MM) | $4,238 | $4,687 | $3,886 | $4,755 | $5,615 | $5,507 |
| Net Interest Expense (MM) | $1,097 | $1,243 | $1,287 | $1,283 | $1,244 | $1,251 |
| Depreciation & Amort. (MM) | $1,792 | $1,949 | $2,072 | $1,705 | $1,779 | $1,829 |
| Diluted Shares (MM) | 2,187 | 2,202 | 2,202 | 2,203 | 2,199 | 2,185 |
| Free Cash Flow (MM) | $1,903 | $1,989 | $2,603 | $6,290 | $6,075 | $4,913 |
| Capital Expenditures (MM) | $4,223 | $4,532 | $3,288 | $2,223 | $1,964 | $3,015 |
| Current Ratio | 0.85 | 0.86 | 1.1 | 1.14 | 0.86 | 0.92 |
| Total Debt (MM) | $30,188 | $33,132 | $35,506 | $37,845 | $36,470 | $37,477 |
| Net Debt / EBITDA | 4.14 | 4.09 | 4.85 | 4.49 | 4.18 | 4.34 |
Enterprise Products Partners has growing revenues and decreasing reinvestment in the business, decent operating margins with a stable trend, and irregular cash flows. However, the firm has a highly leveraged balance sheet. Finally, we note that Enterprise Products Partners has positive expected EPS Growth.
