I've turned sour on propane. It's viciously competitive.
Inergy shows a trailing P/E ratio of 40.7, and a forward P/E ratio of 25.7, as of October 10. Analysts expect the company to have a 1.5% annualized EPS growth in the next five years. It offers a gorgeous dividend of 12.05%, while the profit margin (3.3%) is below the industry average of 5.4%.
Earnings decreased by 222.64% this quarter, and 139.48% this year. Target price is $34.00, implying a 45.2% upside movement potential. Inergy has an O-Metrix score of 2.04. The stock is trading 42.57% lower than its 52-week high, whereas it returned -43.1% in a year. Debts are starting to become a pain, and cash flow is struggling. SMA50 and SMA200 are -13.78% and -32.39%, respectively. Inergy has a horrible PEG value of 17.1. Operating margin is 7.4%, and ROA is 2.31%. There is no green flag in Inergy’s key statistics, so avoid this stock. I don’t think that the dividend is sustainable.
I like Cramer and he is learning about MLPs, but I don't believe he has a sound thesis re NRGY. On his show, he spoke about people switching out of propane--my family members who use it tell me that is more a matter of switching from one supplier to another, no one can afford to have a gas company build a line to their home. Most telling, he is still calling a distribution a dividend, it seems.
Neither Cramer nor analysts seem to have taken the pipeline IPO into account. NRGY will sell off $300M in assets but retain control AND receive IDRs from the new pipeline/storage MLP. Sounds like a pretty good deal to me, reminiscent of the old days with NRGP, but with the roles reversed and the cash flowing to NRGY.
Technically, the stock seems to be trying to form a bottom. If the current distribution is maintained, that should help.