Enterprise Products shares fell by -2.1% during the day's afternoon session, and are now trading at a price of $28.71. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Enterprise Products Shares Are Trading at a Discount:
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 11.0 and a P/B ratio of 2.25.
Enterprise Products'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 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 | $28.71 |
| P/E Ratio | 9.79 | 9.86 | 8.85 | 9.26 | 9.18 | 11.26 |
| 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 | 12.75 |
| 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.
