Enbridge (ENB.TO) Stock Analysis


35
11 shares, 35 points

Breakdown of Enbridge Inc. Stock Analysis

Enbridge Inc. ticker symbol ENB.TO is a popular stock on the TSX, in the sense that it trades high volumes.  In terms of share price, it has fallen out of favour this past year, due to high debt load and strong headwinds, which are giving investors reason to hesitate on Enbridge.  For dividend-seeking investors, ENB.to is an attractive and interesting stock at its current price and dividend yield.  Have at look at my breakdown of Enbridge stock and see what I think of Enbridge stock.  ***the fundamental numbers are updated daily, so the numbers that I discuss might change over time.  I might mention for example the debt level and as it changes the number in the table will change but my analysis won’t as it will be from the time of writing.  So this analysis might be outdated by the time you visit***

For a brief description of what Enbridge is and what it does check out Enbridge stock price page.

SymbolLast Price52 Week High52 Week Low

Enbridge 52 Weeks High & Low Stock Price

✔ ENB stock is close to its 52 week low.  For me, this is good because I feel the decline in price has more to do with news and headwinds than fundamentals.  This makes me think once the bad news and headwinds pass there will be room for the stock price to rise.  Also in terms of dividend investors, this is good as the dividend yield is high.

Market CapAverage VolumeTotal CashTotal Debt

Market Cap

✔ ENB is a large-cap company and for what it is worth is stable and a solid established company.  No worries on my end of this company folding anytime soon.

Average Trading Volume for ENB.TO

✔ More than enough trading volume for Enbridge stock, so no problem buying or selling shares when you want to.

Total Cash & Debt

✖ Enbridge has large amounts of total cash but this does not make up for the fact that the debt load Enbridge is carrying is very large.  Total debt is over 66 billion, which is a crazy high amount of debt in this environment of rising interest rates.  Enbridge has sold some assets this year which is a start to help pay down this heavy debt load, and they are going to absorb some of their subsidiaries such as Enbridge Income Fund (ENF.TO), which should save them some money as ENB.TO dividend payout is less than that of ENF.TO

The graphic below shows Enbridge’s historical debt and how it has ballooned recently due to acquisitions.

ENB Historical Debt

The next graphic which I pulled from my www.Simplywall.st account shows Enbridge’s current liabilities & Assets.

ENB Debt

P/E RatioPrice To BookPEG RatioPrice To Sales Trailing 12 Months

ENB.TO P/E Ratio

✔ The current price to earnings ratio for Enbridge is 27.45x This is above the oil & gas industry average of 20.0x.  The valuation on the surface looks high and over valued, but when you compared the current P/E to the 5 year historical average P/E it looks very good.  ENB historical 5 year average P/E is 64.7x, so quite a bit higher than the current level.

Price To Book P/B

✔ I like the current P/B for Enbridge, it is sitting at 1.29 right now.  Ideally, I would love a price to book of 1 or lower, but how often do we get exactly what we want:)  The current P/B is also much lower than the historical 5-year average price to book which is 4.2

Price To Expected Growth

✖ The current PEG ratio for ENB as of writing this analysis is 1.9, which is high and means you are paying a premium for future growth and the future growth has most likely already been factored into the current stock price.  Would rather see the PEG ratio closer to 1 ideally.  for some reason, the PEG in the table above is incorrect and does not represent the current PEG.  The PEG value in the table might be the forward PEG ratio.

Price To Sales

✔ I really like the current price to sales ratio for Enbridge stock.  It is sitting at 1.55 as of writing this stock analysis.  For me, I like to see the price to sales around 2 and preferably lower than 2.  ENB is well below my threshold and this means that investors are paying a fair or even discount amount for sales.

Current RatioProfit MarginsReturn On EquityRevenue Growth

Current Ratio

✖ The current ratio for Enbridge is low at just 0.56 and I like to see a current ratio of 2 or more.  I like to know that the ratio of assets to liabilities is good and healthy.  Unfortunately again the high debt/liabilities that this company has rears its ugly head.

Profit Margins

✔ The current profit margin as of writing this analysis is 6.21% I have no real problem with this number, and it seems to be in line with ENB historical profit margins.

Return On Equity

✖ The current ROE for ENB stock is 4.01%, this is low and below the average of 5.07% for the oil and gas sector.  Also Enbridge’s historical return on equity for the past 3 years is 8%

Revenue Growth

✖ Right now there is no revenue growth to speak of as the company is current showing negative growth at -3.30%.  I want to see positive revenue growth.  Several analysts are forecasting future revenue growth of approx 9.4%, but as we all know this is just a forecast and essentially an educated guess.

Dividend YieldPayout RatioTarget High PriceTarget Low Price

Dividend Yield

✔ This is for me the most compelling reason to consider investing in ENB stock.  Enbridge’s dividend is currently sitting at 6.52%.  This is a generous dividend yield and when compared to the historical average which is in the rang of 3%.  Enbridge also has a solid track record of increasing its dividend and has stated that it plans to increase the dividend by 10% annually up to 2020.

Payout Ratio

✖ The dividend payout ratio right now is an unsustainable 176%.  I never like to invest is companies that have a dividend payout ratio over 90%.  The thing to consider with Enbridge in this regard is it has a large number of projects that will be finishing and coming on line over the next few years and should help decrease this number.  The one problem is even if these projects are on time and get approval etc Enbridge’s huge debt load hangs over our heads once again and cast doubt.  If the debt load was much lower I would be less concerned with the dividend payout ratio being so high, but with the debt it clouds this metric and is a strong headwind against the company being able to increase the dividend as it plans.

Target High & Low Stock Price

✔ ENB.TO stock are currently trading well below the lowest analyst estimates of $47 and even more discounted compared to the high end of the analysts estimates of $59.  Personally I feel based on future cash flow that Enbridge stock is good value at $46, which means ENB.TO stock has a potential upside of approximately 9%.

Buy, Hold or Sell Enbridge ENB.TO Stock

For me Enbridge scored 9 out of 15 fundamental metrics, which is not terrible but does indicate that this stock is not without risk.  The big issue for me with this stock is the sheer amount of debt that it has on the books, I feel that this burden will increase in weight with rising interest rates.  The other side to this argument of debt load is that Enbridge has like mentioned above has numerous projects that are due to be completed in the next few years and this could strengthen the companies balance sheet and help decrease the debt burden.  But with all oil and gas companies today there is the burden of regulation, protest and political changes that could impact projects getting approved or delaying them coming online.  In short I see a lot of headwinds coming at this company right now, and with the end of the current finacial cycle looming around the corner it makes me weary of investing in Enbridge stock.  I do really like the management and their direction for the company but with the headwinds and current market cycle I am weary and cautious.  If one can tolerate the risk profile of this company right now, I think there is some good upside if the management team can execute their plan without any hiccups.

 

This is not financial advice and all financial investments carry risks. Investors should seek financial advice from professionals before making any investment or financial decision. I wrote this article myself and it expresses my opinions. I currently do not hold any positions in the stocks mentioned in the above article.


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