Plains All American's Revenue Pipeline, Measure for Measure
(Continued from Prior Part)
Plains All American’s forward distribution yield
As we saw in the previous part, Plains All American Pipeline (PAA) is trading at a forward distribution yield of ~14%. By comparison, Enbridge Energy Partners (EEP), Sunoco Logistics Partners (SXL), Magellan Midstream Partners (MMP), and Enterprise Products Partners (EPD) are trading at forward yields of 12.7%, 10.5%, 5.0%, and 7.4%, respectively.
So Plains All American Pipeline’s forward yield is nearly five percentage points higher than the average for selected peers. The company’s flat distribution outlook and low distribution coverage appear to be the prime contributors to its relatively higher yield. PAA makes up ~2% of the Global X MLP & Energy Infrastructure ETF (MLPX), which invests in MLPs (master limited partnerships) and energy infrastructure companies.
Plains All American expected distribution growth
The graph above compares the forward yield of Plains All American Pipeline and those its peers relative to their expected distribution growths. As the graph shows, PAA is trading at the highest distribution yield among select peers. This significantly lower-than-expected distribution growth likely justifies the company’s higher yield.
Comparing PAA’s EV-to-EBITDA multiple with peers
Plains All American Pipeline is trading at a trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 9.9. In comparison, Enbridge Energy Partners (EEP), Sunoco Logistics Partners (SXL), Magellan Midstream Partners (MMP), and Enterprise Products Partners (EPD) are trading at EV-to-EBITDA multiples of 11.9, 10, 15.4, and 13, respectively. Please note that PAA’s EV-to-EBITDA ratio is lowest among select peers.
As for forward multiples, Plains All American Pipeline is trading at a forward EV-to-EBITDA of 8.1. By comparison, Enbridge Energy Partners (EEP), Sunoco Logistics Partners (SXL), Magellan Midstream Partners (MMP), and Enterprise Products Partners (EPD) are trading at forward EV-to-EBITDA ratios of 9.8, 7.7, 15.4, and 12, respectively. Plains All American Pipeline’s forward EV-to-EBITDA multiple implies a valuation discount that can likely be attributed to higher risk and inferior return metrics.
In the next and final part of this series, we’ll analyze the key factors that could likely impact PAA’s stock price in the long run.
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