In an earlier article, I wrote about how well Enterprise Products Partners (NYSE: EPD) has started the year. It posted a record increase in net income, fueled mainly by higher demand for natural gas liquids and a jump in production volumes.

The question now is whether the Texas-based company is fundamentally strong enough to carry its strong start forward.

Income matters
The company's five-year revenue growth sits at 22.3%, whereas in the last four quarters, revenues have grown by 21.3%. Rising demand for natural gas combined with the company's products has resulted in a boost to its bottom line. Now it's time to wonder about how much of these revenues Enterprise has been able to retain. Well, its EBITDA margin has gone up to 7.1% at present from 6.6% in 2006, so the company's core profitability has improved in the past five years.

Return on equity is also an important measure for evaluating a company's profitability, as it tells us how effectively a firm is using its investments to drive future growth. Enterprise's ROE stands at 6.4%, which is worse than comparable El Paso's (NYSE: EP) ROE of 10.5% but better than Williams Companies' (NYSE: WMB) negative ROE of 4.2% in the last twelve months.

Cash flow and debt
From a stability standpoint, the company's debt-to-equity ratio -- a high 119.5% -- worries me a bit. For some perspective, this figure clocks in higher than Williams' 102.6% and much lower than El Paso's dangerously high ratio of 190%.

In general, this high level of debt could be the result of its recent plans to expand its Mid-American Pipeline system. The company has also struck deals with the likes of Anadarko Petroleum (NYSE: APC) and EOG Resources (NYSE: EOG) to provide natural gas processing and transport services in the Eagle Ford shale play. Investment has been the name of the game for Enterprise, causing its debt levels to go above $13 billion with a cash balance of only $197 million. That's a problem. Until it receives returns from these projects, it may seem a risky bet for investors, as the company's current liquidity doesn't back up its debt.  

Fortunately, Enterprise's interest coverage ratio stands at 3.1, and free cash flow is at $132.5 million, implying that it is comfortably placed to pay off debts in the short term, which is good. But for the long term, I'm not so confident.

Value and yield
Enterprise looks expensive when we compare its forward P/E with its peers. It stands at 22.17, whereas El Paso chimes in with 17.46 and Williams' sits at 20.24.

On a cash basis, Enterprise certainly looks expensive when compared with its peers. Enterprise's TEV/FCF is at a high 297.63 compared to Williams' ratio of 50.24. (El Paso has a negative free cash flow, hence its TEV/FCF is not meaningful).

The Foolish bottom line
The company has good future growth potential. On the other hand, it is under a huge amount of debt which may make it financially unstable if it fails to generate the desired returns from these projects. From an investor's standpoint, it's a wait and watch game as it seems like an expensive bet at present.