A Financial Analysis of Magellan Midstream Partners LP
The Oil & Gas Pipelines is a 5 trillion dollar industry. Corporations like Williams Company, Spectra Energy, and Kinder Morgan Energy Partners are all market cap-leaders in this Basic Material sector division. However, one company, Magellan Midstream Partners (MMP), a 3.1 billion dollar mid-cap equity, stands out from the rest of the industry. Looking at the companies' financial figures and overall strategic plan, there is clear evidence that this corporation has the potential to produce high capital gains for investors.
Like most of the companies in this industry, Magellan, according to Reuters, "is principally engaged in the transportation, storage and distribution of refined petroleum products." Having bases in the Gulf of Mexico, what separates Magellan from its rivals is its area of distribution. This Tulsa, Oklahoma-based corporation's, according to Yahoo! Finance, "pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, and Illinois." With such a limited geographic base, some skepticism may be allocated for serving only a handful of states. However, there is significant demand for oil in these regions. According to various gas price resources, the price of gas is around $3.50 in many places in Chicago. And in North Dakota, prices range around the $3.20 mark. High demand means higher prices, and with crude oil futures rising to near $65 dollars, up 20% from its lows earlier this year, coupled with a summer season with high travel rates and a strong potential for hurricane activity, Magellan would be a direct beneficiary of such news. It is true that companies like Williams and Spectra would also be impacted in a similar manner, but what further differentiates the "8,500-mile petroleum products pipeline system" Magellan has from its rivals is its fundamentals.
Magellan has only seen a drop in share price once year-over-year since its IPO near the beginning of this century. Much of this success can be attributed to strong revenue growth, especially over the past year. Year-over-year, Magellan has seen, according to Capital IQ, about 4.60% quarterly revenue growth. While many investors may argue against such a low number, out of the three aforementioned companies, Williams, Spectra, and Kinder-Morgan, only Spectra has a higher number. However, what Magellan has that is better than Spectra is 2.5 times the revenue per share. In addition, while both Spectra and Magellan support strong operating margins, Magellan especially with its 20% trailing twelve month figure beats out both Williams and Kinder-Morgan in this very important statistic. Success on the top-line should transcend to success on the bottom line as well.
Profit margin for Magellan is 15.70%. Much of this number directly is involved with this company's forward P/E ratio of 18.3. Not only is this figure significantly below the average multiple for the industry, but the ratio is below Spectra's 18.4 forward multiple and Kinder-Morgan's 26.2 forward ratio as well. Examining this number, would it be fair to assess that Magellan is not only a mid-cap growth stock, but a value equity as well? Unfortunately, while price to sales at 2.53, enterprise value to revenue at 3.21, and enterprise value to EBITDA at 12.47 are all pretty similar or below the other companies, it is more fair to say that Magellan is a still rapidly growing corporation. And eventually, if price stays the same as it is now there could be a strong argument that Magellan is undervalued in the coming months and years. While the PEG ratio of 2.41 is not generally a great number to assess strong growth for a company, relatively for the industry, the number is lower than most other companies and should also contribute to strong growth potential in the future.
What is also important when looking at any company is to examine the management team and the ratios that they directly affect. Fortunately, CEO Don Wellendorf and his 1,064 employees have done a great job relative to the company's competitors. Looking at the important ROE, Magellan reports a figure of 23.91%. This figure is not only higher than the industry at 14.30%, but higher than Spectra and Williams' figures as well. ROA of 8.62% over the next five years is also higher than the industry average, in addition to having an ROI of 9.70% over the next five years which is also higher than the industry. Cash flow, both leveraged and operating, is both positive, which is not the case for many of the other companies in this industry. Capital expenditure at 33.5 over five years is nearly double that of the industry. While solvency is not as strong as the industry or some of the competitors, again, Magellan has only recently started to trade publicly, and is still growing—quite impressively.
Therefore, once again, Magellan is not a value company, but a growth equity. Dividend yield at over 5.2% is phenomenal for this industry and sector, and investors should benefit from owning this stock even if there is an off chance that Magellan does not produce. However, with the aforementioned strategic plan and fundamentals, Magellan, trading below its 50 day SMA would be an excellent consideration of any investor's portfolio.
Like most of the companies in this industry, Magellan, according to Reuters, "is principally engaged in the transportation, storage and distribution of refined petroleum products." Having bases in the Gulf of Mexico, what separates Magellan from its rivals is its area of distribution. This Tulsa, Oklahoma-based corporation's, according to Yahoo! Finance, "pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, and Illinois." With such a limited geographic base, some skepticism may be allocated for serving only a handful of states. However, there is significant demand for oil in these regions. According to various gas price resources, the price of gas is around $3.50 in many places in Chicago. And in North Dakota, prices range around the $3.20 mark. High demand means higher prices, and with crude oil futures rising to near $65 dollars, up 20% from its lows earlier this year, coupled with a summer season with high travel rates and a strong potential for hurricane activity, Magellan would be a direct beneficiary of such news. It is true that companies like Williams and Spectra would also be impacted in a similar manner, but what further differentiates the "8,500-mile petroleum products pipeline system" Magellan has from its rivals is its fundamentals.
Magellan has only seen a drop in share price once year-over-year since its IPO near the beginning of this century. Much of this success can be attributed to strong revenue growth, especially over the past year. Year-over-year, Magellan has seen, according to Capital IQ, about 4.60% quarterly revenue growth. While many investors may argue against such a low number, out of the three aforementioned companies, Williams, Spectra, and Kinder-Morgan, only Spectra has a higher number. However, what Magellan has that is better than Spectra is 2.5 times the revenue per share. In addition, while both Spectra and Magellan support strong operating margins, Magellan especially with its 20% trailing twelve month figure beats out both Williams and Kinder-Morgan in this very important statistic. Success on the top-line should transcend to success on the bottom line as well.
Profit margin for Magellan is 15.70%. Much of this number directly is involved with this company's forward P/E ratio of 18.3. Not only is this figure significantly below the average multiple for the industry, but the ratio is below Spectra's 18.4 forward multiple and Kinder-Morgan's 26.2 forward ratio as well. Examining this number, would it be fair to assess that Magellan is not only a mid-cap growth stock, but a value equity as well? Unfortunately, while price to sales at 2.53, enterprise value to revenue at 3.21, and enterprise value to EBITDA at 12.47 are all pretty similar or below the other companies, it is more fair to say that Magellan is a still rapidly growing corporation. And eventually, if price stays the same as it is now there could be a strong argument that Magellan is undervalued in the coming months and years. While the PEG ratio of 2.41 is not generally a great number to assess strong growth for a company, relatively for the industry, the number is lower than most other companies and should also contribute to strong growth potential in the future.
What is also important when looking at any company is to examine the management team and the ratios that they directly affect. Fortunately, CEO Don Wellendorf and his 1,064 employees have done a great job relative to the company's competitors. Looking at the important ROE, Magellan reports a figure of 23.91%. This figure is not only higher than the industry at 14.30%, but higher than Spectra and Williams' figures as well. ROA of 8.62% over the next five years is also higher than the industry average, in addition to having an ROI of 9.70% over the next five years which is also higher than the industry. Cash flow, both leveraged and operating, is both positive, which is not the case for many of the other companies in this industry. Capital expenditure at 33.5 over five years is nearly double that of the industry. While solvency is not as strong as the industry or some of the competitors, again, Magellan has only recently started to trade publicly, and is still growing—quite impressively.
Therefore, once again, Magellan is not a value company, but a growth equity. Dividend yield at over 5.2% is phenomenal for this industry and sector, and investors should benefit from owning this stock even if there is an off chance that Magellan does not produce. However, with the aforementioned strategic plan and fundamentals, Magellan, trading below its 50 day SMA would be an excellent consideration of any investor's portfolio.
The Oil & Gas Pipelines is a 5 trillion dollar industry. Corporations like Williams Company, Spectra Energy, and Kinder Morgan Energy Partners are all market cap-leaders in this Basic Material sector division. However, one company, Magellan Midstream Partners (MMP), a 3.1 billion dollar mid-cap equity, stands out from the rest of the industry. Looking at the companies' financial figures and overall strategic plan, there is clear evidence that this corporation has the potential to produce high capital gains for investors.
Like most of the companies in this industry, Magellan, according to Reuters, "is principally engaged in the transportation, storage and distribution of refined petroleum products." Having bases in the Gulf of Mexico, what separates Magellan from its rivals is its area of distribution. This Tulsa, Oklahoma-based corporation's, according to Yahoo! Finance, "pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, and Illinois." With such a limited geographic base, some skepticism may be allocated for serving only a handful of states. However, there is significant demand for oil in these regions. According to various gas price resources, the price of gas is around $3.50 in many places in Chicago. And in North Dakota, prices range around the $3.20 mark. High demand means higher prices, and with crude oil futures rising to near $65 dollars, up 20% from its lows earlier this year, coupled with a summer season with high travel rates and a strong potential for hurricane activity, Magellan would be a direct beneficiary of such news. It is true that companies like Williams and Spectra would also be impacted in a similar manner, but what further differentiates the "8,500-mile petroleum products pipeline system" Magellan has from its rivals is its fundamentals.
Magellan has only seen a drop in share price once year-over-year since its IPO near the beginning of this century. Much of this success can be attributed to strong revenue growth, especially over the past year. Year-over-year, Magellan has seen, according to Capital IQ, about 4.60% quarterly revenue growth. While many investors may argue against such a low number, out of the three aforementioned companies, Williams, Spectra, and Kinder-Morgan, only Spectra has a higher number. However, what Magellan has that is better than Spectra is 2.5 times the revenue per share. In addition, while both Spectra and Magellan support strong operating margins, Magellan especially with its 20% trailing twelve month figure beats out both Williams and Kinder-Morgan in this very important statistic. Success on the top-line should transcend to success on the bottom line as well.
Profit margin for Magellan is 15.70%. Much of this number directly is involved with this company's forward P/E ratio of 18.3. Not only is this figure significantly below the average multiple for the industry, but the ratio is below Spectra's 18.4 forward multiple and Kinder-Morgan's 26.2 forward ratio as well. Examining this number, would it be fair to assess that Magellan is not only a mid-cap growth stock, but a value equity as well? Unfortunately, while price to sales at 2.53, enterprise value to revenue at 3.21, and enterprise value to EBITDA at 12.47 are all pretty similar or below the other companies, it is more fair to say that Magellan is a still rapidly growing corporation. And eventually, if price stays the same as it is now there could be a strong argument that Magellan is undervalued in the coming months and years. While the PEG ratio of 2.41 is not generally a great number to assess strong growth for a company, relatively for the industry, the number is lower than most other companies and should also contribute to strong growth potential in the future.
What is also important when looking at any company is to examine the management team and the ratios that they directly affect. Fortunately, CEO Don Wellendorf and his 1,064 employees have done a great job relative to the company's competitors. Looking at the important ROE, Magellan reports a figure of 23.91%. This figure is not only higher than the industry at 14.30%, but higher than Spectra and Williams' figures as well. ROA of 8.62% over the next five years is also higher than the industry average, in addition to having an ROI of 9.70% over the next five years which is also higher than the industry. Cash flow, both leveraged and operating, is both positive, which is not the case for many of the other companies in this industry. Capital expenditure at 33.5 over five years is nearly double that of the industry. While solvency is not as strong as the industry or some of the competitors, again, Magellan has only recently started to trade publicly, and is still growing—quite impressively.
Therefore, once again, Magellan is not a value company, but a growth equity. Dividend yield at over 5.2% is phenomenal for this industry and sector, and investors should benefit from owning this stock even if there is an off chance that Magellan does not produce. However, with the aforementioned strategic plan and fundamentals, Magellan, trading below its 50 day SMA would be an excellent consideration of any investor's portfolio.
Like most of the companies in this industry, Magellan, according to Reuters, "is principally engaged in the transportation, storage and distribution of refined petroleum products." Having bases in the Gulf of Mexico, what separates Magellan from its rivals is its area of distribution. This Tulsa, Oklahoma-based corporation's, according to Yahoo! Finance, "pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, and Illinois." With such a limited geographic base, some skepticism may be allocated for serving only a handful of states. However, there is significant demand for oil in these regions. According to various gas price resources, the price of gas is around $3.50 in many places in Chicago. And in North Dakota, prices range around the $3.20 mark. High demand means higher prices, and with crude oil futures rising to near $65 dollars, up 20% from its lows earlier this year, coupled with a summer season with high travel rates and a strong potential for hurricane activity, Magellan would be a direct beneficiary of such news. It is true that companies like Williams and Spectra would also be impacted in a similar manner, but what further differentiates the "8,500-mile petroleum products pipeline system" Magellan has from its rivals is its fundamentals.
Magellan has only seen a drop in share price once year-over-year since its IPO near the beginning of this century. Much of this success can be attributed to strong revenue growth, especially over the past year. Year-over-year, Magellan has seen, according to Capital IQ, about 4.60% quarterly revenue growth. While many investors may argue against such a low number, out of the three aforementioned companies, Williams, Spectra, and Kinder-Morgan, only Spectra has a higher number. However, what Magellan has that is better than Spectra is 2.5 times the revenue per share. In addition, while both Spectra and Magellan support strong operating margins, Magellan especially with its 20% trailing twelve month figure beats out both Williams and Kinder-Morgan in this very important statistic. Success on the top-line should transcend to success on the bottom line as well.
Profit margin for Magellan is 15.70%. Much of this number directly is involved with this company's forward P/E ratio of 18.3. Not only is this figure significantly below the average multiple for the industry, but the ratio is below Spectra's 18.4 forward multiple and Kinder-Morgan's 26.2 forward ratio as well. Examining this number, would it be fair to assess that Magellan is not only a mid-cap growth stock, but a value equity as well? Unfortunately, while price to sales at 2.53, enterprise value to revenue at 3.21, and enterprise value to EBITDA at 12.47 are all pretty similar or below the other companies, it is more fair to say that Magellan is a still rapidly growing corporation. And eventually, if price stays the same as it is now there could be a strong argument that Magellan is undervalued in the coming months and years. While the PEG ratio of 2.41 is not generally a great number to assess strong growth for a company, relatively for the industry, the number is lower than most other companies and should also contribute to strong growth potential in the future.
What is also important when looking at any company is to examine the management team and the ratios that they directly affect. Fortunately, CEO Don Wellendorf and his 1,064 employees have done a great job relative to the company's competitors. Looking at the important ROE, Magellan reports a figure of 23.91%. This figure is not only higher than the industry at 14.30%, but higher than Spectra and Williams' figures as well. ROA of 8.62% over the next five years is also higher than the industry average, in addition to having an ROI of 9.70% over the next five years which is also higher than the industry. Cash flow, both leveraged and operating, is both positive, which is not the case for many of the other companies in this industry. Capital expenditure at 33.5 over five years is nearly double that of the industry. While solvency is not as strong as the industry or some of the competitors, again, Magellan has only recently started to trade publicly, and is still growing—quite impressively.
Therefore, once again, Magellan is not a value company, but a growth equity. Dividend yield at over 5.2% is phenomenal for this industry and sector, and investors should benefit from owning this stock even if there is an off chance that Magellan does not produce. However, with the aforementioned strategic plan and fundamentals, Magellan, trading below its 50 day SMA would be an excellent consideration of any investor's portfolio.
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