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Should Value Investors Buy Energy Transfer LP (ET) Stock?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Energy Transfer LP (ET) is a stock many investors are watching right now. ET is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 10.75, which compares to its industry's average of 12.97. Over the last 12 months, ET's Forward P/E has been as high as 12.49 and as low as 7.47, with a median of 10.56.

Another valuation metric that we should highlight is ET's P/B ratio of 1.24. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2. Over the past 12 months, ET's P/B has been as high as 1.33 and as low as 0.44, with a median of 1.18.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ET has a P/S ratio of 0.71. This compares to its industry's average P/S of 1.69.

Finally, investors should note that ET has a P/CF ratio of 6.95. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. ET's current P/CF looks attractive when compared to its industry's average P/CF of 9.42. ET's P/CF has been as high as 7.41 and as low as 2.64, with a median of 6.58, all within the past year.

These are only a few of the key metrics included in Energy Transfer LP's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ET looks like an impressive value stock at the moment.


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