EPD Intrinsic Stock Value – Wall Street’s Fear of CapEx Creep Unwarranted for Enterprise Products Partners L.P.
December 29, 2023
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Wall Street has been concerned over the potential for Enterprise Products Partners ($NYSE:EPD) L.P. (EPD) to increase their capital expenditure, but these fears may be unfounded. EPD is an energy infrastructure company that provides a range of midstream services for the energy industry, ranging from natural gas to oil and petrochemicals. EPD’s services include natural gas processing and transportation, oil refining and storage, as well as petrochemical storage and transportation. This has given analysts reason to believe that EPD’s CapEx could increase should their business continue to expand.
However, EPD’s management has been very judicious in their spending, preferring organic growth to acquisitions, which has helped to keep CapEx at a manageable level. EPD’s approach of gradual, organic growth has enabled them to maximize returns on their investments.
In addition, they have maintained a strong balance sheet and strong cash flows, which has allowed them to fund their CapEx without taking on additional debt. Overall, Wall Street’s fears of an increase in Enterprise Products Partners’ capital expenditure have been overstated. The company has proven to be conservative with its spending while still achieving steady growth, and should not be expected to see an increase in CapEx in the near future.
Market Price
This suggests that the market is confident in the company’s ability to manage their capital expenditures. In other words, Wall Street is not overly concerned that the company’s CapEx spending will spiral out of control. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for EPD. More…
| Total Revenues | Net Income | Net Margin |
| 48.74k | 5.33k | 11.0% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for EPD. More…
| Operations | Investing | Financing |
| 7.26k | -4.95k | -5.84k |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for EPD. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 67.73k | 39.71k | 12.41 |
Key Ratios Snapshot
Some of the financial key ratios for EPD are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 20.1% | 5.8% | 14.0% |
| FCF Margin | ROE | ROA |
| 9.4% | 15.8% | 6.3% |
Analysis – EPD Intrinsic Stock Value
At GoodWhale, we have carefully analyzed the financials of ENTERPRISE PRODUCTS PARTNERS L.P. and have calculated a fair intrinsic value of their share to be around $27.0. This calculation was based on our proprietary Valuation Line which looks into various factors such as earnings, cash flow, growth, and risk. Currently, ENTERPRISE PRODUCTS PARTNERS L.P.’s stock is trading at $26.2, which is below its intrinsic value. We can say that it is currently undervalued by 2.8%. For investors looking for a good long-term opportunity in the energy sector, this could be the right time to invest in ENTERPRISE PRODUCTS PARTNERS L.P. More…
Peers
Enterprise Products Partners LP is a Houston-based partnership that owns and operates pipelines and other energy-related transportation and storage facilities. The company’s main competitors are Energy Transfer LP, Enbridge Inc, and Kinder Morgan Inc. All three companies are based in North America and are involved in the transportation and storage of oil and natural gas.
– Energy Transfer LP ($NYSE:ET)
Energy Transfer LP is a publicly traded partnership that owns and operates energy infrastructure assets in the United States. The company’s assets include natural gas pipelines, natural gas storage facilities, and crude oil pipelines. Energy Transfer LP is headquartered in Dallas, Texas.
– Enbridge Inc ($TSX:ENB)
Enbridge Inc is a Canadian energy transportation and distribution company. It has a market capitalization of $103.97 billion as of 2022 and a return on equity of 9.87%. The company operates in the oil and gas industry and owns and operates a network of pipelines that transport crude oil, natural gas, and refined products in Canada and the United States. Enbridge also owns and operates a fleet of oil tankers and gas storage facilities.
– Kinder Morgan Inc ($NYSE:KMI)
Kinder Morgan Inc is a leading North American energy company that specializes in the transport, storage, and distribution of natural gas and crude oil products. The company has a market capitalization of $40.72 billion as of 2022 and a return on equity of 7.82%. Kinder Morgan is one of the largest energy infrastructure companies in North America, with a network of approximately 84,000 miles of pipelines and 160 terminals. The company’s pipelines transport natural gas, crude oil, refined products, and CO2, while its terminals store and handle petroleum products, chemicals, and other bulk materials.
Summary
Enterprise Products Partners L.P. is a leading provider of midstream services. Recent analysis from Wall Street has expressed concern over CapEx creep, or an increase in spending on capital expenditures.
However, the company’s strong cash flow and management’s commitment to disciplined capital allocation has enabled it to remain within its mandated budget. The ample liquidity, robust balance sheet and conservative approach to capital spending has resulted in a strong dividend yield, as well as low debt ratios. Furthermore, the company’s strong competitive position in the energy market provides it with an advantage over its peers. Investing in Enterprise Products Partners L.P. may prove to be a sound long-term investment strategy.
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