Summary: OVERPRICED
Score: 9/20
MOS: 1%
Share Price: $24.30
Sticker Price: $24.58
Is Enterprise stock a good buy?
Enterprise Products Partners is a midstream natural gas and crude il pipeline company founded in 1968 and headquartered in Houston, TX. They specifically operate over 50,000 miles of oil, petrochemical, natural gas, and natural gas liquid pipelines, 14 cubic feet of natural gas storage capacity, and 21 natural gas liquid processing plants.
This article from The Motley Fool states that Enterprise Products Partners is a “no brainer” to invest in right now due to the recovering economy. As more people get back to commuting as well as traveling, the demand for oil and gas will increase.
Although the demand for oil and gas is high today, it won’t be nearly as high in the future. For example, this article from bbc.com states that by 2025, 20% of all new cars will be electric. By 2030 40% of all cars will be electric. And by 2040 virtually every new car will be electric. Although the automobile industry is just one segment the oil and gas industry serves, there are other segments that are likely to see the decline to the increase in renewable energy.
This article from woodmac.com states that oil demand may fall by 70% by the year 2050. They also talk about gas becoming more valuable than oil over the next two decades, calling it a “Reversal of Fortune”. They do emphasize the importance of decarbonization and how we should be aware of the rising global temperatures.
This article from climate.gov states that according to NOAA’s 2020 climate report the combined land and ocean temperature has increased at an average rate of 0.13 degrees Fahrenheit ( 0.08 degrees Celsius) per decade since 1880; however, the average rate of increase since 1981 (0.18°C / 0.32°F) has been more than twice that rate.
I listen to The Motley Fool podcast and read The Motley Fool news but I always check Tykr to see if a stock is a wise or not-so-wise recommendation. In this circumstance, I see the potential short-term increase in Enterprise Products Partners share price due to travel increasing but I cannot get behind this business as a long-term investment.
Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
Revenue (Found on the Income Statement)
2017: $29B
2018: $36B
2019: $32B
2020: $27B
Revenue is at its lowest point since 2017.
Net Income (Found on the Income Statement)
2017: $2.7B
2018: $4.1B
2019: $4.5B
2020: $3.7B
Net Income has declined.
EPS (Found on the Income Statement)
2017: 1.30
2018: 1.91
2019: 2.10
2020: 1.72
EPS has declined.
Free Cash Flow (Found on the Cash Flow Statement)
2017: $1.5B
2018: $1.9B
2019: $1.9B
2020: $2.6B
Free Cash Flow has increased which is a good sign.
Total Assets (Found on the Balance Sheet)
2017: $54B
2018: $56B
2019: $61B
2020: $64B
Total Assets have increased which is a good sign.
Total Liabilities (Found on the Balance Sheet)
2017: $9.2B
2018: $7.1B
2019: $9.1B
2020: $8.9B
Total Liabilities have remained relatively flat which is okay.
Total Debt (Found on the Balance Sheet)
2017: $24B
2018: $26B
2019: $27B
2020: $29B
Total Debt has also remained level.
Total Equity (Found on the Balance Sheet)
2017: $22B
2018: $24B
2019: $25B
2020: $25B
Total Equity has also remained level.
Enterprise Products Partners may indeed see a short-term price gain but due to the growing demand for renewable energy, oil and gas companies are too much of a risk. Aside from the business model, the score of 9/20 and MOS of 1% should make us extremely cautious on moving forward.
Keep in mind, the Score, MOS, and Summary listed above are reported as of July 14, 2021. Please login to Tykr to see an up-to-date analysis.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.