15 Feb

Is Kinder Morgan Attractively Valued?

WRITTEN BY Ruth King FEATURED IN Company News, Insights, & Analysis

Discount compared to historical valuation

Kinder Morgan (KMI) is currently trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of nearly 12.5x. This is lower than its four-year-average multiple of ~15x.

Is Kinder Morgan Attractively Valued?

Discount relative to peers

Using LTM (last 12-month) EBITDA, Kinder Morgan trades at an EV-to-EBITDA of ~12.4x. This is lower than the average of ~15x for select peers. Kinder Morgan’s multiple is higher, however, than that of Energy Transfer Partners (ETP).

Is Kinder Morgan Attractively Valued?

The above graph compares KMI’s EV-to-EBITDA multiple with selected peers. So KMI seems to be trading at a discount to its own historical valuation and to peers.

Notably, Kinder Morgan’s yield of 2.2% is lower than Enterprise Products Partners’ (EPD) 5.7% yield, Magellan Midstream Partners’ (MMP) 4.3%, and Energy Transfer Equity’s (ETE) 6%. The SPDR S&P 500 ETF (SPY) (SPX-INDEX) currently yields nearly 2%.

Impact of general partner interests and IDRs

The EV-to-EBITDA can be misleading when trying to understand LP (limited partner) unit valuations. This is because the entire EBITDA in the EV-to-EBITDA ratio calculation may not be available to limited partners due to the presence of IDRs (incentive distribution rights). It’s thus useful to make adjustments to EBITDA to reflect the interests of limited partners.

Both Enterprise Products Partners and Magellan Midstream Partners don’t have IDRs, while ETP has IDRs.

To learn more about IDRs, read The Importance of Incentive Distribution Rights for MLPs.

Continue to the next and final part of the series for a look at what Wall Street analysts are recommending for KMI.

Latest articles

18 Mar

Tilray Reports Its Fourth-Quarter Earnings


Tilray (TLRY) reported its quarterly earnings after the market closed. The company reported a total quarterly sales of $15.5, which increased nearly 203.8% year-over-year.

Earlier today, US tech giant Apple (AAPL) launched new versions of its iPad Air and iPad Mini. The company is set to hold a special event on March 25.

18 Mar

How Facebook Aims to Compete with Twitch


Facebook has stated that over 700 million of its users play games, watch gaming videos, and engage in gaming groups on its platform.

On March 18, President Trump tweeted, “GDP growth during the four quarters of 2018 was the fastest since 2005.” Let’s look at the data.

Today, Steel Dynamics released its first-quarter earnings guidance. It expects its first-quarter EPS to be between $0.88 and $0.92.

18 Mar

Why Amazon Is Interested in YES Network


Amazon (AMZN) recently teamed up with the Yankees and other investors to purchase the YES Network.