AMUB - MLP/Midstream Valuations Part 2: Examining EBITDA Multiples
With the shortcomings surrounding yield-focused valuation metrics discussed earlier this week, today's piece continues the valuation conversation by focusing on enterprise-value-to-EBITDA (EV/EBITDA) metrics for midstream. Similar to free cash flow yield and price-to-cash-flow, EV/EBITDA is a superior method for valuing midstream compared to metrics based on dividend yield alone. Despite the significant recovery from March lows, midstream multiples remain depressed relative to historical averages - a differentiating point for midstream compared to other sectors and the broader market. With the evolution of the midstream business model in recent years, are the historical averages even relevant?