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Better Buy: Enterprise Products Partners or Energy Transfer Partners?

By Motley Fool Staff | More Articles
December 11, 2009 | Comments (6)

In a new Motley Fool series, we pit two stocks against each other on five criteria to determine the better buy.

Today's matchup is Enterprise Products Partners (NYSE: EPD  ) vs. Energy Transfer Partners (NYSE: ETP  ) . Using five short-of-scientific-but-carefully chosen criteria, let's determine which is the better buy according to the numbers:

 

Factor

Enterprise Products Partners

Energy Transfer Partners

Cheapness

(P/E ratio)

20.0

18.6

Growth

(5-year growth rate)

13.0%

20.2%

Operations

(net margin %)

5.72%

11.94%

Balance Sheet

(debt/equity ratio)

1.36

1.50

CAPS Rating

(scale of 1 to 5 stars)
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Round 1: Cheapness

Advantage: Energy Transfer Partners. Cheapness is determined by P/E ratio. The lower the better. Be careful of earnings near zero that skew the ratio, one-time gains and losses, and pasts that aren’t indicative of futures (the more dynamic the industry, the more this is true).

Round 2: Growth

Advantage: Energy Transfer Partners. Growth here is the trailing 5-year EPS growth rate. This trailing earnings growth helps put notoriously-optimistic Wall Street projections in perspective.

Round 3: Operations

Advantage: Energy Transfer Partners. Net margin percentage shows how efficiently a company turns revenue into profit. The more similar the business models, the more relevant the comparison.

Round 4: Balance sheet

Advantage: Enterprise Products Partners. As with net margins, the debt to capital ratio is most relevant in comparing companies in similar industries. In this battle we give the nod to the lower-debt company, but attention should also be paid to the cost of debt, interest coverage ratios, and the stability of the business (the more stable a company’s operations, the more debt it can safely carry).

Round 5: CAPS rating

Advantage: Energy Transfer Partners. A company’s CAPS rating is our community’s opinion of the stock. Energy Transfer Partners has a slightly greater numerical CAPS rating than Enterprise Products Partners's (even though they have the same number of stars). You can get more information on your stocks -- and our community’s opinions of those stocks -- by clicking over to CAPS area.

Each of these five rankings need more context -- like, how these companies stack up against key competitors such as Energy Transfer Equity (NYSE: ETE  ) and Devon Energy (NYSE: DVN  ) . But these basic numbers suggest that Energy Transfer Partners is a better buy. What do you think? Let us know in the comments section below.

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No individual person selected the stocks in this article, so there is no author to disclose an interest in them. Since this article was automatically generated by identifying the stocks loved both by the CAPS community and by buyers in today’s market, it is possible that Motley Fool personnel (and even The Motley Fool itself, through our Million Dollar Portfolio, Motley Fool Pro, and Ready Made Millionaire services), have positions in these stocks. We thought you'd like to know that. You can learn more about The Motley Fool’s disclosure policy here.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 11, 2009, at 10:44 AM, MarkfromReston wrote:

    Such a promising article that falls way short. First, in the MLP sector, p/e ratios don't mean as much as with other stocks because of depreciation and hedging charges. Better to focus on Distributable Cash Flow and the coverage ratio (when is the investing media going to get with it). Second, what about distribution yield and growth? No mention or comparison here. Third, what about enterprise value to EBITDA ratio. Fourth, who cares about your self-promoting CAPs rank. Finally, ETE is not a competitor -- they are the general partner of ETP and Devon is an exploration and production company. Other competitors would include other pipeline MLPs, like KMP, OKS and PAA, to name a few.

  • Report this Comment On December 12, 2009, at 11:32 AM, BoilerEngineer wrote:

    The analysis and comparison comprehends only the past and present. EPD has just merged with Teppco creating a juggernaut in the pipeline / storage sector, and their future outlook might be brighter than the historical data suggests. Both EPD and ETP are great companies with yield and growth. Buy Both!

  • Report this Comment On December 13, 2009, at 9:01 PM, sniren wrote:

    You compared epd and etp

    I have Enterprise products partners

    ar the time I liked it .

    I have a couple others for exemple

    Buckeye partners -bpl and I am

    not complaining.

  • Report this Comment On December 16, 2009, at 12:10 PM, cfg3450 wrote:

    Do not compare MLP and stocks like XTO and DVN

    Oranges and Apples....

  • Report this Comment On December 29, 2009, at 3:45 PM, 3chains wrote:

    What an absurd and useless article. For those who are unfamiliar with MLPs, perhaps even harmful. MLPs can be a fantastic component of a total portfolio, especially for those who want/need a high dividend stream. However, this article does not even point out that EPD and ETP *are* MLPs, and as the first commenter notes, does not use the best ways of comparing them. Better off not writing anything than putting this out.

  • Report this Comment On January 05, 2010, at 8:36 PM, Fool wrote:

    I own both of these mlps (or ptps) and believe both are good investments that meet my goal.

    S&P research indicates 12 month target price EPD at $41 which makes it better for those investing at this time. Check it out!

    Have same number shares both ,but larger distribution ETP (1.5 more). Hopefully if price increases EPD so will distribution?

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Related Tickers

2/9/2012 4:01 PM
ETP $46.45 Down -0.38 -0.81%
Energy Transfer Pa… CAPS Rating: *****
EPD $50.00 Up +0.11 +0.22%
Enterprise Product… CAPS Rating: *****
ETE $42.49 Up +0.49 +1.17%
Energy Transfer Eq… CAPS Rating: *****
DVN $66.23 Down -0.03 -0.05%
Devon Energy Corp CAPS Rating: *****

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