Critical Review: Energy Transfer (ET) and Tallgrass Energy GP (TEGP)

Energy Transfer (NYSE:ET) and Tallgrass Energy GP (NYSE:TEGP) are both oils/energy companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, analyst recommendations, profitability, dividends, institutional ownership, earnings and valuation.

Valuation and Earnings

This table compares Energy Transfer and Tallgrass Energy GP’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Energy Transfer $40.52 billion 0.46 $915.00 million $1.21 13.20
Tallgrass Energy GP N/A N/A N/A N/A N/A

Energy Transfer has higher revenue and earnings than Tallgrass Energy GP.

Insider and Institutional Ownership

44.1% of Energy Transfer shares are held by institutional investors. Comparatively, 31.8% of Tallgrass Energy GP shares are held by institutional investors. 3.3% of Energy Transfer shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Energy Transfer and Tallgrass Energy GP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Energy Transfer 2.60% 5.50% 1.85%
Tallgrass Energy GP N/A N/A N/A

Analyst Ratings

This is a summary of recent recommendations and price targets for Energy Transfer and Tallgrass Energy GP, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Energy Transfer 0 0 1 0 3.00
Tallgrass Energy GP 1 2 3 0 2.33

Energy Transfer presently has a consensus price target of $20.00, indicating a potential upside of 25.23%. Tallgrass Energy GP has a consensus price target of $23.17, indicating a potential upside of 4.54%. Given Energy Transfer’s stronger consensus rating and higher possible upside, equities analysts clearly believe Energy Transfer is more favorable than Tallgrass Energy GP.

Dividends

Energy Transfer pays an annual dividend of $1.22 per share and has a dividend yield of 7.6%. Tallgrass Energy GP pays an annual dividend of $1.95 per share and has a dividend yield of 8.8%. Energy Transfer pays out 100.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tallgrass Energy GP has increased its dividend for 2 consecutive years. Tallgrass Energy GP is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Energy Transfer beats Tallgrass Energy GP on 8 of the 12 factors compared between the two stocks.

Energy Transfer Company Profile

Energy Transfer LP provides diversified energy-related services in the United States. It owns and operates approximately 7,900 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas; and approximately 11,800 miles of interstate natural gas pipelines. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. It owns and operates natural gas and natural gas liquid (NGL) gathering pipelines, as well as natural gas processing plants, treating facilities, and conditioning facilities in Texas, New Mexico, West Virginia, Pennsylvania, and Louisiana; natural gas gathering, oil pipeline, and oil stabilization facilities in South Texas; a natural gas gathering system in Ohio; and transportation and supply of water to natural gas producers in Pennsylvania. The company also owns approximately 4,300 miles of NGL pipelines, 5 NGL and propane fractionation facilities, and NGL storage facilities with aggregate working storage capacity of approximately 53 million barrels. It also sells gasoline, middle distillates, and motor fuel at retail, as well as crude oil, NGLs, and refined products; operates convenience stores; and distributes motor fuels and other petroleum products. The company provides natural gas compression services; treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration, and British thermal unit management services; and manages coal and natural resources properties, as well as sells standing timber, leases coal-related infrastructure facilities, collects oil and gas royalties, and generates a total of 75 megawatts electrical power. The company was formerly known as Energy Transfer Equity, L.P. and changed its name to Energy Transfer LP in October 2018. The company was founded in 2002 and is based in Dallas, Texas.

Tallgrass Energy GP Company Profile

Tallgrass Energy GP, LP, through its interests in Tallgrass Equity, LLC, provides crude oil transportation services to customers in Wyoming, Colorado, and the surrounding regions of the United States. The company operates through three segments: Natural Gas Transportation; Crude Oil Transportation; and Gathering, Processing & Terminalling. It also provides natural gas transportation and storage services for customers in the Rocky Mountain, Midwest, and Appalachian regions; natural gas and crude oil gathering and processing services for customers in Wyoming; and natural gas liquids (NGLs) transportation services in Northeast Colorado and Wyoming. In addition, the company offers water business services, including freshwater transportation, and produced water gathering and disposal in Colorado, Texas, and Wyoming; crude oil storage and terminalling services in Colorado; and marketing services for NGLs and crude oil. Tallgrass Energy GP, LP was founded in 2013 and is based in Leawood, Kansas.

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