Analyzing MLPs with F.A.S.T. Graphs™

2017-02-15

Introduction

What is the best metric to use to analyze the value of MLPs with F.A.S.T. Graphs™?

This is one of the more common questions we receive from subscribers.  With this “Helpful Hints” video we will offer our specific views on attempting to discern the fair value of an MLP utilizing the fundamentals analyzer software tool.  However, the more general answer to this question is that subscribers should take advantage of all the analytical horsepower that F.A.S.T. Graphs™ offers.  Therefore, the general answer to this question is to utilize all the metrics available to you.  Remember that F.A.S.T. Graphs™ are offered as a tool to think with.

For both basic and premium subscribers, this video will provide an interesting MLP valuation method when utilizing adjusted operating earnings.  Since MLPs are often favored for their high yield characteristics, ascertaining fair value is remarkably correlated by looking at stock price in comparison to their dividend (distributable income) over time.  We do not consider this especially sophisticated financial analysis, but we believe you will find the price to dividend correlations uncanny.  Premium subscribers can also utilize the EBIDTA metric as a valuable valuation metric.

Finally, this video will also cover the significant unit holder dilution that exists with most every publicly traded MLP.  These entities must invest significantly in hard assets in order to grow and prosper.  Consequently, most MLPs are constantly raising capital by issuing additional units in the marketplace.  However, this capital is used to expand infrastructure which generates revenue growth that can be utilized to continue increasing distributions to unit holders.

 

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