Is Enterprise Products Partners (EPD) a buy as it lags its peers?

Enterprise Products Partners (NYSE: EPD) stock price has continued to underperform its peers this year. It has risen by 11.84%, outperforming the S&P 500 and Nasdaq 100 indices. The stock has underperformed popular Master Limited Partnerships (MLPs) like Energy Transfer, The Williams Companies, ONEOK, and MPLX. 

EPD vs ET vs WMB vs OKE vs MPLX

EPD stock has lagged behind key peers

Enterprise Products Partners’ underperformance is not new. As shown above, its total return in the past five years was 47.37%. In contrast, Energy Transfer returned 60% while companies like ONEOK and MPLX had better returns. Only Kinder Morgan has had weaker returns.

EPD has underperformed the market even as the company’s operations have done well. Its total revenue in 2023 stood at $49.7 billion, an increase from the $32.7 billion that it made in 2019. The figure was, nonetheless, lower than the $58 billion it made in the previous year.

EPD’s profitability has been impressive. Its net income jumped from $4.9 billion in 2019 to over $5.5 billion in 2023. Most importantly, the company has also reduced its total long-term debt gradually. Its debt load peaked at $28.5 billion in 2020 and has now retreated to $27.4 billion.

There is a possibility that Enterprise Products Partners shares will continue doing well even though it is not cheap. Its forward price to cash flow stands at 7.72, higher than the sector median of 5.67. 

The same is true with other valuation metrics. Its price to free cash flow was 8.44, higher than the sector median of 5.09. Similarly, its forward EV to EBITDA of 9.58 is also higher than the industry median of 5.95. 

Still, the stock could continue doing well in the coming years. For one, investments in pipelines have retreated in the past few years because of the ongoing transition and the growing opposition from energy activists.

Further, energy prices are bouncing back as demand rises. Brent and West Texas Intermediate (WTI) have all jumped to $90 and $86, respectively. 

For starters, Enterprise Products Partners is one of the biggest MLP companies in the world. It runs over 50,000 miles of pipelines in North America.

The company operates as a Master Limited Partnership, which gives it favourable tax preferences, as I wrote here.

Enterprise Products Partners stock analysis

EPD chart by TradingView

The weekly chart shows that the EPD share price has been in an uptrend since the pandemic when it dropped to $7.45. It has now soared to almost $30. Most recently, the stock has risen in the past seven straight weeks.

The shares have remained above the 50-week and 100-week moving averages. Further, the Average Directional Index (ADX) has moved above 40, which is a sign that the uptrend is continuing.

The Relative Strength Index (RSI) has moved above the overbought level. Therefore, the stock could continue rising in the coming months as bulls target the key point at $35.