With Kinder Morgan Inc (KMI, Financial) experiencing a daily gain of 3.46% and a three-month gain of 11.35%, investors are keen to understand whether these positive trends reflect the company's true value. Especially considering its Earnings Per Share (EPS) of $1.1, the question arises: Is Kinder Morgan fairly valued? This article delves into a valuation analysis to explore the intrinsic worth of Kinder Morgan shares. Read on for an in-depth examination of the company's financials and market positioning.
Company Introduction
Kinder Morgan, one of North America's largest midstream energy firms, boasts a vast network that includes approximately 83,000 miles of pipelines and 140 storage terminals. The company plays a pivotal role in the transportation, storage, and processing of natural gas, crude oil, refined products, natural gas liquids, and carbon dioxide. The majority of Kinder Morgan's cash flows are derived from fee-based contracts, ensuring stability in its operations. A comparison between Kinder Morgan's stock price of $18.84 and the GF Value of $17.24 reveals an intriguing picture of the company's current market valuation.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, formulated by GuruFocus. It incorporates historical trading multiples, an adjustment factor based on past performance and growth, and future business performance estimates. This value serves as a benchmark for the stock's ideal fair trading value. Currently, Kinder Morgan (KMI, Financial) appears to be fairly valued, with a market cap of $41.80 billion. This assessment suggests that the long-term return of Kinder Morgan's stock is likely to mirror the rate of its business growth.
Financial Strength
Investors should always consider a company's financial strength before investing. Companies with weak financials pose a higher risk of permanent capital loss. Kinder Morgan's cash-to-debt ratio stands at 0, positioning it lower than its peers in the Oil & Gas industry. With a financial strength score of 4 out of 10, Kinder Morgan's financial health is a point of concern for investors.
Profitability and Growth
Profitability is a crucial aspect of a company's stability and safety. Kinder Morgan has maintained profitability for the last decade, with an impressive operating margin of 27.78%, ranking higher than 77.6% of its industry counterparts. The company's profitability rank is 7 out of 10, reflecting its sound financial performance. However, growth is equally important, and Kinder Morgan's 3-year average annual revenue growth of 9.9% and EBITDA growth rate of 5.2% lag behind many competitors in the Oil & Gas industry.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) offers insight into its profitability relative to the capital invested. Ideally, ROIC should exceed WACC. For Kinder Morgan, the ROIC is 4.63, which is below its WACC of 6.89, indicating potential inefficiencies in generating cash flow relative to the capital invested.
Conclusion
In summary, Kinder Morgan's stock seems to be fairly valued at the current price. Nevertheless, the company's financial condition is less than ideal, and its profitability, while fair, is coupled with growth that underperforms more than two-thirds of its industry peers. For a more detailed understanding of Kinder Morgan's financial health and prospects, investors are encouraged to review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
