Equitrans Midstream (ETRN): A Closer Look at Its Market Value
Equitrans Midstream Corp (NYSE:ETRN) has recently seen a daily gain of 3.68%, despite a 3-month loss of -2.73%. The stock also recorded a Loss Per Share of 0.73. This raises the question: is the stock modestly overvalued? To answer this, we will delve into a detailed valuation analysis of Equitrans Midstream Corp (NYSE:ETRN). We invite you to read on and gain a deeper insight into the company's value.
Company Introduction
Equitrans Midstream, following its acquisition of EQM Midstream in mid-2020, now owns EQM assets directly, providing gathering, transmission, and water services to primarily Appalachian producers in Pennsylvania, West Virginia, and Ohio. With a current stock price of $9.3 and a GF Value of $7.37, the market cap of Equitrans Midstream stands at $4 billion. The company's financial performance and intrinsic value will be explored in detail in the following sections.
GF Value Summary
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line offers a visual guide to the stock's fair trading value.
Equitrans Midstream Corp (NYSE:ETRN) appears to be modestly overvalued based on the GF Value calculation. This suggests that the long-term return of its stock is likely to be lower than its business growth. Below is the GF Value chart of Equitrans Midstream for a more detailed view.
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Financial Strength
Investing in companies with poor financial strength can pose a high risk of permanent capital loss. Equitrans Midstream's cash-to-debt ratio of 0.02 ranks worse than 92.2% of 1026 companies in the Oil & Gas industry, indicating poor financial strength. Below is a chart showing the debt and cash of Equitrans Midstream over the past years.
Profitability and Growth
Investing in profitable companies typically carries less risk. Equitrans Midstream has been profitable for 4 out of the past 10 years and has an operating margin of 50.74%, better than 91.62% of companies in the Oil & Gas industry. However, the company's growth is worse than 90.23% of 860 companies in the industry, with a 3-year average revenue growth rate and a 3-year average EBITDA growth rate of -18.5%.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and weighted average cost of capital (WACC) can provide insights into its profitability. Equitrans Midstream's ROIC is 6.62, lower than its WACC of 8.67 for the past 12 months. Below is a historical comparison of Equitrans Midstream's ROIC and WACC.
Conclusion
In conclusion, the stock of Equitrans Midstream (NYSE:ETRN) appears to be modestly overvalued. The company's financial condition is poor, its profitability is fair, and its growth ranks worse than 84.5% of companies in the Oil & Gas industry. To learn more about Equitrans Midstream stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
