EPD

Considering an Investment in Enterprise Products (EPD)? Read This!

We've been asking ourselves recently if the market has placed a fair valuation on Enterprise Products. 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.

Enterprise Products Is Currently Under 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 20.3 and an average price to book (P/B) ratio of 2.25. In contrast, Enterprise Products has a trailing 12 month P/E ratio of 10.9 and a P/B ratio of 2.24.

Enterprise Products's PEG ratio is 1.7, 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 Firm Has a Highly Leveraged Balance Sheet:

2018 2019 2020 2021 2022 2023
Revenue (M) $36,534 $32,789 $27,200 $40,807 $58,186 $49,715
Operating Margins 15% 19% 19% 15% 12% 14%
Net Margins 11% 14% 14% 11% 9% 11%
Net Income (M) $4,172 $4,591 $3,775 $4,634 $5,487 $5,529
Net Interest Expense (M) $1,097 $1,243 $1,287 $1,283 $1,244 $1,269
Depreciation & Amort. (M) $1,792 $1,949 $2,072 $151 $177 $201
Diluted Shares (M) 2,187 2,202 2,202 2,203 2,199 2,194
Earnings Per Share $1.91 $2.09 $1.71 $2.1 $2.5 $2.52
EPS Growth n/a 9.42% -18.18% 22.81% 19.05% 0.8%
Avg. Price $18.89 $20.7 $15.22 $19.63 $23.14 $28.56
P/E Ratio 9.79 9.86 8.85 9.26 9.18 11.2
Free Cash Flow (M) $1,903 $1,989 $2,603 $6,290 $6,075 $4,303
CAPEX (M) $4,223 $4,532 $3,288 $2,223 $1,964 $3,266
EV / EBITDA 9.26 9.03 8.74 11.12 11.09 12.7
Total Debt (M) $26,178 $27,625 $29,866 $29,535 $28,295 $28,748
Net Debt / EBITDA 3.59 3.4 4.05 4.27 3.98 4.01
Current Ratio 0.85 0.86 1.1 1.14 0.86 0.93

Enterprise Products has weak operating margins with a stable trend, not enough current assets to cover current liabilities because its current ratio is 0.93, and a highly leveraged balance sheet. On the other hand, the company benefits from generally positive cash flows and positive EPS growth. Furthermore, Enterprise Products has growing revenues and decreasing reinvestment in the business.

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.

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