Analyzing MPLX's Key Drivers in 2016
(Continued from Prior Part)
MPLX’s forward distribution yield
As we saw in the previous part, MPLX trades at a forward distribution yield of 4.9%. In comparison, Plains All American Pipeline (PAA), Boardwalk Pipeline Partners (BWP), Enterprise Products Partners (EPD), Williams Partners (WPZ), and Enbridge Energy Partners (EEP) trade at forward distribution yields of 12.4%, 3.3%, 6.4%, 13.1%, and 10.3%, respectively.
MPLX’s forward yield is nearly 4% lower compared to the average for its selected peers. MPLX’s consistent distribution growth, reasonable leverage, and strong coverage contribute to its relatively lower yield.
MPLX’s expected distribution growth
The above graph compares the forward yield of MPLX and its peers relative to their expected distribution growths. MPLX’s higher expected distribution growth likely justifies its relatively lower yield.
MPLX’s merger with MarkWest Energy, as well as future dropdowns from its sponsor Marathon Petroleum Corp. (MPC), is expected to support its future distribution growth. MPLX forms ~2% of the Global X MLP and Energy Infrastructure ETF (MLPX), which invests in MLPs and energy infrastructure companies.
EV/EBITDA multiple
MPLX trades at a trailing 12-month EV/EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 19. In comparison, PAA, BWP, EPD, WPZ, and EEP trade at EV/EBITDA multiples of 10.4, 9.5, 14.2, 14.1, and 12.9, respectively. MPLX’s EV/EBITDA ratio is higher than the peer average.
As for forward multiples, MPLX trades at a forward EV/EBITDA of 11.4. PAA, BWP, EPD, WPZ, and EEP trade at forward EV/EBITDA ratios of 8.4, 8.9, 13.2, 8.0, and 10.4, respectively. MPLX’s forward EV/EBITDA multiple implies a valuation premium likely attributed to lower risk and robust return metrics.
In the final part of this series, we’ll analyze the key factors that can impact MPLX’s stock price in the long run.
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