Is It Time To Reassess Enterprise Products Partners (EPD) After Strong Multi Year Returns

• If you are wondering whether Enterprise Products Partners is still good value at around US$36.11 per unit, it helps to step back and look at what the current price might be implying about the business.
• The stock last closed at US$36.11, with reported returns of 1.9% over the past week, 9.8% over the past month, 12.3% year to date, 14.9% over 1 year, 72.9% over 3 years and 135.2% over 5 years. This naturally raises questions about how much of the story is already reflected in the price.
• Recent attention on Enterprise Products Partners has largely revolved around its role in the US energy infrastructure space and how the partnership fits into income focused portfolios, with investors weighing its distribution profile against sector peers. Broader sector news around energy demand, commodity price moves and interest rate expectations has also shaped how the market is pricing pipeline and midstream names, including EPD.
• Simply Wall St currently gives Enterprise Products Partners a valuation score of 5/6, which suggests it screens as undervalued on most of their checks. Next, we will walk through what different valuation methods say about that pricing, before finishing with a more holistic way to think about value beyond the usual models.

Find out why Enterprise Products Partners's 14.9% return over the last year is lagging behind its peers.

Approach 1: Enterprise Products Partners Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth by projecting its future cash flows and then discounting those back to today’s value. It is essentially asking what future cash that Enterprise Products Partners might generate is worth in present day dollars.

For Enterprise Products Partners, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model based on cash flow projections. The partnership’s latest twelve month free cash flow is about $4.2b. Analyst inputs and extrapolated estimates point to free cash flow of $7.7b in 2030, with a path of projected cash flows between 2026 and 2035 that are discounted back to today using the model’s assumptions.

Pulling all of those discounted cash flows together, the model arrives at an estimated intrinsic value of about $86.22 per unit. Compared with the recent unit price of roughly $36.11, this implies a discount of around 58.1%, which indicates that the units screen as materially undervalued based on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Enterprise Products Partners is undervalued by 58.1%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Enterprise Products Partners.

Approach 2: Enterprise Products Partners Price vs Earnings (P/E)

For a profitable business like Enterprise Products Partners, the P/E ratio is a useful way to see what the market is paying for each dollar of earnings. It ties the current unit price directly to the earnings power of the partnership, which is often a key anchor for long term investors.

What counts as a “normal” P/E really comes down to how the market views future earnings growth and risk. Higher growth or more resilient earnings usually justify a higher P/E, while higher perceived risk or more volatile earnings usually point to a lower P/E.

Enterprise Products Partners currently trades on a P/E of 13.44x. That sits a little below the Oil and Gas industry average of 14.50x, and also below the peer group average of 21.15x. Simply Wall St’s Fair Ratio for Enterprise Products Partners is 23.83x, which is their proprietary estimate of an appropriate P/E given factors such as earnings growth, profit margins, industry, market cap and specific risks.

Because the Fair Ratio folds these company specific inputs into a single benchmark, it can be more tailored than a simple comparison with peers or the industry. On this view, Enterprise Products Partners current P/E of 13.44x is below the Fair Ratio of 23.83x, which indicates that the units screen as undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Enterprise Products Partners Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives to link your view of the Enterprise Products Partners story to a set of revenue, earnings and margin forecasts. These then roll into a fair value that you can compare with today’s price. They update automatically when new earnings or news arrive. You can also see them side by side with other investors’ views, such as one Narrative that ties a US$40 fair value to confidence in buybacks and export driven earnings, and another that anchors closer to US$32 with more caution around tariffs, debt and producer activity in the Permian.

Do you think there's more to the story for Enterprise Products Partners? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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