Enterprise Products Partners LP
Enterprise Products Partners LP (NYSE: EPD): Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. The NGL Pipelines & Services segment offers natural gas processing and related NGL marketing services. The company was founded in 1968 and is headquartered in Houston, Texas.
Why the investors should exit?
Valuation Methodology: Price/Sales Per-share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
EPD's stock price displayed volatility in recent times and somehow managed to stay above the 50 DMA and 200 DMA after getting beaten up heavily. The price action showed good strength after bouncing from the lows of USD 20.42 and a steep vertical rally very close to print USD 25 on the tape. Looking at the market capitalization of the company and observing such wild swings in its prices, makes the investors feel uncomfortable at the time. The results were applauded but the reaction of the prices are again hinting at something which isn’t very much clear in the results, hence it gives a red flag at such levels.
We have valued the stock using the Price/Sale per share based on relative valuation methodology and arrived at a target price of USD 19.21. The current price of USD 23.62, makes the valuation and price unsustainable at such levels and encourages the investors to book some profit or sit on the sidelines for some time. The rising interest rates and high inflation will curb consumer spending and will indirectly impact the demand of services of EDP in near to medium on a worst-case scenario. Hence, we recommend a "Sell" rating on the stock at the price of USD 23.74, down by 0.17% as of February 2, 2022, at 02:54 PM ET.
1-Year Technical Price Chart (as on February 2, 2022, at 02:54 PM ET). Source: REFINITIV, Analysis by Kalkine Group
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.