Energy Transfer (ET) Stock Still Looks Like A Bargain Today

Energy Transfer has delivered a strong multi year run for unitholders, which puts a spotlight on a simple question for new buyers and long term holders alike: Is the current unit price properly supported by the partnership’s earnings power today?

• Over the past 5 years, Energy Transfer has returned 217.4%, which makes it important to ask how much of that gain is grounded in sustainable earnings versus changing expectations.
• Recent coverage has highlighted major capital spending plans and a large pipeline footprint, which can influence how consistently the partnership converts revenue into earnings and how much cash is left after funding growth projects.
• Your read on Energy Transfer is one view; the desks covering it have another. See what analysts think Energy Transfer's shares could be worth.

The stock’s next move may depend on whether Energy Transfer’s current earnings justify the price investors are being asked to pay today.

To pressure test whether Energy Transfer’s earnings really underpin its recent run, you can apply the same lens to a wider group of 30 high quality undervalued stocks.

Is Energy Transfer Still Cheap on Earnings?

The P/E ratio is a useful way to think about what investors are paying today for each dollar of Energy Transfer’s earnings. It links directly back to how efficiently the partnership turns its large pipeline footprint and fee based contracts into bottom line profit.

Energy Transfer trades on a P/E of about 14.0x, which is below both the Oil and Gas industry average of roughly 12.6x and the peer group on about 18.6x. On a tailored fair value view that looks at the partnership’s growth profile, margins, scale and risk, the current P/E also sits below the level that model would normally imply for this business, so the units screen as undervalued on this metric. Because the recent plan to shift listings to the Texas Stock Exchange has raised the profile of the partnership without changing its earnings base, the current discount on the P/E ratio still suggests investors are not paying a premium for that move. Explore the numbers behind Energy Transfer's P/E valuation.

The Energy Transfer Narrative: What Would Justify Today's Price?

Narratives for Energy Transfer pick up where the P/E puzzle leaves off by spelling out in plain language which paths for future growth, margins and earnings would need to play out for the units to trade meaningfully higher or lower than today’s price, and by turning each single valuation number into a concrete future that you can watch unfold over time. These sit on Simply Wall St’s Community page as a reference point for that ongoing check.

One of the top community narratives on Energy Transfer: 17% undervalued

"Recent long term customer commitments on multi billion dollar projects are now supported by more than 6 Bcf/d of contracted pipeline capacity..."

Discover why this Narrative puts Energy Transfer at 17% undervalued.

One more thing about Energy Transfer that could shift your view

The valuation picture for Energy Transfer only tells part of the story, because Simply Wall St’s broader checks have also picked up specific concerns that investors may want to weigh before getting comfortable. Take a closer look at 2 warning signs (1 major) before settling on a valuation.

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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