EPD.
Every now and again I find it of interest to put a stock, that is favoured, through my template, just to see how it looks in terms of its actual fundamentals. There are virtually no 'variables', such as Price, involved. And the numbers are generally TTM numbers.
The targets are not quite as 'strict' as Buffetts as DCA companies are not that common. But they do attempt to single out companies that are generally operating well in their business ....
Soooo, ..... no doubt due to the nature of its business EPD has a low SG&A deduction. Good.
However its Cost of Revenue is eating up about 82% of its Gross Revenue.
EPD is carrying a large debt load which further eats into the 12% left over at its Gross Profit level. That may not be that bad now when rates are low but it's an aspect that could hurt them later.
We see that EDP is currently only paying about 1% in Tax. I'm not sure what's behind that, and the question is, 'how long can that continue', because its "inflating" the Bottom Line. Needless to say, if it was paying the normal ~25% rate it's Net Profit would be less than what it's currently reporting.
Based on Buffett's "Equity Bond" aspect, EPD is currently at a discount. However, this criteria probably works best when there's a healthy, ongoing increase in a company's Pretax Income.
In EPD's case, for the period 2014 to 2017, its Pretax Inc. went from $2857m to $2881m, which is only about 1% up over 4 years.
However in 2018 there was a healthy increase to $4299m due, primarily, to a surge in its Top Line Revenue.
For the last 2 Quarters EPD reported an aggregate Pretax Inc. of $(1293m + 1246m) = $2539m, so it looks like there could be a reasonable increase in Pretax Income for the full year.
Maybe that price discount will become an attractive feature.
Looking at EPD's share price performance it my be an idea to keep an eye on a fall below its $26.50 level ...... |
