We have noted Enterprise Products's positive performance during today's afternoon trading session, during which it logged a 1.0% outperformance of the S&P 500. At its current price of $32.82, the company is now trading in range of its average target price of $34.12, which calls into question its ability to keep moving higher. Analysts have given the Oil & Gas Transportation and Processing stock target prices ranging from $31.0 to $37.0 dollars per share, with an average rating of buy.
The market seems to share this optimistic view, since Enterprise Products has a short interest of only 1.3% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 26.0% of Enterprise Products's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
Overall, there is positive market sentiment on Enterprise Products because its an analyst consensus of some upside potential, a buy rating, a very low short interest, and only a small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are EPD's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 7,569,000 | 3,266,000 | 4,303,000 | -29.17 |
| 2022 | 8,039,000 | 1,964,000 | 6,075,000 | -3.42 |
| 2021 | 8,513,000 | 2,223,000 | 6,290,000 | 141.64 |
| 2020 | 5,891,000 | 3,288,000 | 2,603,000 | 30.88 |
| 2019 | 6,520,500 | 4,531,700 | 1,988,800 | 4.5 |
| 2018 | 6,126,300 | 4,223,200 | 1,903,100 |
