A Rare Combination of Growth, Yield and Low Valuation — But Is the Discount Justified?
Energy Transfer LP (NYSE: ET) occupies an interesting position in the U.S. energy sector.
It owns one of the largest and most interconnected energy infrastructure systems in North America. It is growing faster than most traditional pipeline companies. It pays a distribution yielding roughly 6%. Natural-gas demand from data centers, power generation and LNG exports is creating new growth opportunities. Yet Energy Transfer continues to trade at a substantial valuation discount to companies such as Williams, Kinder Morgan, ONEOK and Targa Resources.
That raises the obvious question:
Is Energy Transfer genuinely undervalued, or does the lower valuation simply compensate investors for greater risk?
After comparing ET with Enterprise Products Partners (EPD), MPLX, Kinder Morgan (KMI), ONEOK (OKE), Williams (WMB) and Targa Resources (TRGP), my conclusion is:
Energy Transfer is arguably the best combination of growth, income and valuation among the large U.S. midstream companies today.
However, I would not call it the safest company in the group. Enterprise Products Partners remains financially stronger and arguably better governed. MPLX is cheaper on P/E and offers an even higher yield. Targa is currently growing extremely quickly but commands a dramatically higher valuation.
ET’s attraction is therefore not that it wins every category. It is that few competitors offer ET’s combination of infrastructure quality, growth opportunities and a low enterprise valuation simultaneously.
Financial and valuation data in this article are current as of September 2, 2026.
What Exactly Does Energy Transfer Own?
It is easy to think of Energy Transfer as simply a pipeline company. That significantly understates the business.
Energy Transfer controls approximately 140,000 miles of pipelines and associated infrastructure across 44 states, with exposure to essentially every major U.S. hydrocarbon-producing basin. Its operations span natural-gas gathering and processing, interstate and intrastate gas pipelines, natural-gas liquids, crude-oil transportation, storage, fractionation, terminals and exports.
This creates an important competitive advantage.
ET doesn’t merely transport one commodity from Point A to Point B. Its enormous interconnected system allows hydrocarbons to move through multiple stages of the value chain.
Natural gas can enter an ET gathering system, be processed, move through an ET pipeline and eventually reach an industrial customer, power plant, LNG facility or data center.
Natural gas liquids can move from the Permian Basin through ET pipelines to its Mont Belvieu fractionation system and ultimately to the Nederland export terminal.
This wellhead-to-water infrastructure network is extremely difficult to reproduce.
A competitor theoretically could construct an individual pipeline. Replicating ET’s entire network would require tens of billions of dollars, numerous regulatory approvals, rights-of-way, customer relationships, storage facilities, processing plants, fractionators, export terminals and decades of construction.
That is ET’s real moat.
The AI Boom Is Becoming a Natural-Gas Infrastructure Boom
Perhaps the most interesting change in the Energy Transfer story is that its future increasingly revolves around electricity demand rather than merely oil and gas production growth.
AI data centers require enormous amounts of reliable electricity. Renewable generation will provide part of that power, but natural gas is increasingly being used as the dependable generation source capable of operating around the clock.
Energy Transfer sits directly in the middle of that trend.
The company has agreements to supply approximately 900 million cubic feet per day of natural gas to three Oracle data centers, and the first deliveries began in January 2026. It has subsequently signed additional contracts related to power plants and data-center facilities.
The Hugh Brinson Pipeline is now in commercial service and was expected to reach its full Phase I capacity of roughly 1.5 Bcf/day around September 1, 2026. ET is also building the massive Desert Southwest expansion of Transwestern Pipeline, capable of moving as much as 2.3 Bcf/day toward Arizona and New Mexico.
The company is simultaneously benefiting from another secular trend:
U.S. energy exports.
Its Nederland expansion will increase ethane export capacity by approximately 240,000 barrels per day and LPG capacity by another 55,000 barrels per day. Particularly impressive is that 100% of the additional ethane export capacity is already committed under long-term agreements extending into the 2040s.
This matters enormously.
ET is not spending billions hoping customers appear afterward. Much of the expansion is supported by long-duration contractual commitments.
Growth Has Accelerated Dramatically
Energy Transfer’s second-quarter 2026 numbers were unusually strong for a mature pipeline company.
Adjusted EBITDA increased from $3.87 billion to $5.07 billion, a 31% year-over-year increase.
Adjusted distributable cash flow increased from $1.96 billion to $2.59 billion, up approximately 32%.
Management consequently increased full-year 2026 Adjusted EBITDA guidance to $18.8-$19.1 billion, while increasing growth-capital expectations to approximately $5.6-$5.9 billion.
Operationally, NGL transportation volumes increased 13%, NGL exports increased 25%, crude transportation rose 4%, and midstream gathered volumes reached another company record.
This is not normal utility-like growth.
ET is currently behaving more like an infrastructure growth company that happens to distribute substantial cash to investors.
And management sees enough attractive projects to continue investing billions.
Importantly, ET said its new projects were being targeted at mid-teens returns with construction multiples below roughly 6× EBITDA.
If ET can consistently build assets at roughly 6× EBITDA while its assets eventually receive market valuations materially above that level, incremental investment should create substantial long-term value.
ET Versus Its Major Competitors
Here is where the investment becomes especially interesting.
| Company | Trailing P/E | Forward P/E | EV/EBITDA | Debt/EBITDA | Yield | Main Advantage |
|---|---|---|---|---|---|---|
| Energy Transfer (ET) | ~14.7× | ~13.0× | ~8.3× | ~4.0× | ~6.3% | Growth + valuation |
| Enterprise Products (EPD) | ~13.6× | ~12.7× | ~11.5× | ~3.2× | ~5.6% | Quality + balance sheet |
| MPLX | ~12.7× | ~12.7× | ~13.9× | ~4.2× | ~7.3% | Income + low P/E |
| Kinder Morgan (KMI) | ~20.6× | ~21.7× | ~13.6× | ~4.1× | ~3.7% | Natural-gas network |
| ONEOK (OKE) | ~16.6× | ~15.3× | ~12.1× | ~4.3× | ~4.5% | Integrated C-Corp |
| Williams (WMB) | ~29× | ~30× | ~17.4× | ~4.3× | ~2.8% | Premium natural-gas assets |
| Targa Resources (TRGP) | ~28× | ~26× | ~15.1× | ~3.4× | ~1.5–1.7% | Highest growth |
Current valuation data come from S&P Global Market Intelligence data compiled by StockAnalysis.
The table reveals something important:
ET Is NOT the Cheapest on P/E
MPLX trades around 12.7× trailing earnings.
EPD trades around 13.6×.
ET trades around 14.7×.
Therefore, saying simply that “ET has the lowest P/E” would be incorrect.
But P/E isn’t necessarily the best valuation measure for infrastructure businesses because different depreciation structures, asset ages, tax structures and capital structures distort reported earnings.
EV/EBITDA tells a completely different story.
ET trades around 8.3× trailing EBITDA.
EPD is approximately 11.5×.
OKE approximately 12.1×.
KMI approximately 13.6×.
MPLX approximately 13.9×.
TRGP approximately 15.1×.
Williams approximately 17.4×.
That is an enormous discount.
Using ET’s current enterprise value and the midpoint of management’s 2026 EBITDA guidance produces an approximate forward enterprise multiple of only 7.5-7.6× EBITDA.
That makes ET look substantially cheaper.
ET Versus Enterprise Products Partners: The Most Important Comparison
If I were comparing ET with just one company, it would be Enterprise Products Partners.
EPD is arguably the benchmark for high-quality MLP management.
Enterprise’s second-quarter 2026 Adjusted EBITDA increased 17% to a record $2.8 billion, while operational distributable cash flow increased 21% to $2.3 billion. Distribution coverage was approximately 1.9×, and EPD retained approximately $1.1 billion of quarterly DCF.
EPD also has debt/EBITDA of only roughly 3.2×, compared with approximately 4.0× at ET, and EPD’s return on invested capital is approximately 11.6%, versus approximately 8.5% for ET.
EPD has also increased its distribution for 27 consecutive years.
That is extraordinary.
So if someone asked:
“Which company would I trust most to preserve my capital through another severe energy downturn?”
I would probably choose EPD.
But if the question becomes:
“Which gives me the better combination of growth and valuation today?”
I lean toward ET.
You are paying approximately 8.3× EBITDA for ET versus about 11.5× for EPD while ET is currently growing considerably faster.
That discount compensates investors for ET’s higher leverage, more aggressive historical capital allocation and weaker governance structure.
At today’s relative valuations, however, the discount may be larger than necessary.
ET Versus MPLX
MPLX deserves serious consideration.
Its approximately 7.3% yield is higher than ET’s, while its P/E of roughly 12.7× is lower. MPLX also expects sizable distribution increases in 2026 and 2027.
Second-quarter Adjusted EBITDA was approximately $1.775 billion, versus $1.690 billion a year earlier, with $1.5 billion of distributable cash flow.
For an investor whose primary objective is current income, MPLX may actually be preferable to ET.
But growth is the differentiator.
MPLX’s second-quarter EBITDA increased roughly 5%, while ET increased 31%.
And despite MPLX’s lower P/E, its EV/EBITDA multiple is around 13.9× versus only 8.3× for ET.
Therefore I find ET more attractive for total return, while MPLX remains exceptionally attractive for income.
ET Versus Kinder Morgan
Kinder Morgan is another superb natural-gas infrastructure franchise and should benefit significantly from rising electricity demand.
Its second-quarter 2026 Adjusted EBITDA increased approximately 12% to $2.2 billion.
The problem is valuation.
KMI trades at approximately 20.6× earnings and 13.6× EV/EBITDA, while yielding only approximately 3.7%. Debt/EBITDA is approximately 4.1×.
ET therefore gives investors:
higher yield,
lower P/E,
far lower EV/EBITDA,
similar leverage,
and currently faster growth.
At these valuations, I strongly prefer ET over KMI.
ET Versus ONEOK
ONEOK is an extremely good company and has built an increasingly integrated pipeline franchise.
Second-quarter Adjusted EBITDA increased approximately 7% to $2.12 billion, and management raised 2026 EBITDA guidance to a midpoint of approximately $8.35 billion.
But OKE trades around 16.6× earnings and 12.1× EV/EBITDA, versus 14.7× and 8.3× respectively for ET.
Its leverage is also slightly higher on the current S&P Global measure at roughly 4.3× debt/EBITDA.
ONEOK has one major practical advantage: it is a traditional C-Corporation. ET is a publicly traded partnership, meaning ET investors normally receive a Schedule K-1, creating additional tax complexity.
But strictly from business growth and valuation, ET currently looks more attractive.
ET Versus Williams
Williams owns one of America’s most strategically important natural-gas systems, including Transco.
Its position servicing LNG facilities, utilities and growing power demand deserves a premium valuation.
Second-quarter Adjusted EBITDA increased approximately 6% to $1.92 billion, and Williams raised the midpoint of 2026 EBITDA guidance to approximately $8.4 billion.
But investors are paying heavily for that quality.
WMB trades around 29-30× earnings and 17.4× EBITDA, while yielding less than 3%.
I like Williams enormously as a business.
At today’s prices, however, I prefer owning ET.
The valuation difference is simply too large.
ET Versus Targa Resources
Targa may be the most formidable growth competitor.
TRGP’s earnings momentum is exceptional, and its Permian gathering, processing, NGL transportation and fractionation assets constitute an outstanding franchise.
The market knows this.
Investors currently pay around 28× earnings and 15× EBITDA for Targa.
ET trades at roughly half Targa’s enterprise multiple and offers a materially higher cash yield.
Therefore, someone seeking maximum growth regardless of valuation could reasonably prefer TRGP.
Someone seeking growth at a sensible price should find ET more interesting.
Is ET Actually Less Risky Because It Is Cheaper?
This requires an important distinction.
There are two forms of risk:
business risk and price-paid risk.
ET probably has lower price-paid risk than WMB, TRGP, KMI and OKE because expectations embedded in its valuation are considerably lower.
A company trading at 8× EBITDA does not require as much future perfection as one trading at 15-17×.
But ET does not have the lowest financial risk.
Its debt/EBITDA is around 4.0× and interest coverage roughly 3×. Enterprise Products has materially lower leverage and much stronger interest coverage.
ET investors also should remember 2020.
When COVID and the energy collapse hit, Energy Transfer cut its quarterly distribution in half.
That historical event matters.
The company today is financially stronger, capital allocation has improved and management appears much more focused on maintaining balance-sheet discipline.
But EPD’s multi-decade record of consistently increasing distributions deserves a higher quality rating.
Therefore:
ET is cheaper, but EPD is safer.
Those are not contradictory statements.
One Decision Shows How Management Has Changed
One development particularly improves my view of today’s Energy Transfer.
For years, ET had a reputation for pursuing large projects aggressively.
Lake Charles LNG was potentially another enormous capital commitment.
But in December 2025, management suspended development of Lake Charles LNG, explicitly saying that ET’s pipeline backlog offered superior risk-adjusted returns.
That is exactly what shareholders should want.
Management effectively said:
“We have already spent time developing this project, but the returns available elsewhere are now better, so we are reallocating the money.”
That indicates significantly greater capital discipline than the ET of a decade ago.
Who Actually Runs Energy Transfer?
Energy Transfer currently has two Co-Chief Executive Officers: Thomas Long and Mackie McCrea.
However, that is changing.
Mackie McCrea notified the company in June 2026 that he intends to retire on or before December 31, 2026. After McCrea retires, Thomas Long will become Energy Transfer’s sole CEO. McCrea plans to remain on the board.
But anyone analyzing ET management must recognize another person:
Kelcy Warren
Warren is the founder and Executive Chairman, and his strategic influence remains enormous.
In many respects, evaluating Energy Transfer without evaluating Kelcy Warren would be like analyzing Berkshire Hathaway historically without considering Warren Buffett.
Thomas Long: Intelligence
I would rate Thomas Long highly on the intelligence/capital-allocation dimension.
Long came through the financial side of Energy Transfer and previously served as CFO before becoming Co-CEO. This background is visible in ET’s current focus on leverage, financing, project returns and disciplined capital allocation.
Under the current leadership team, ET has progressively strengthened its balance sheet, restored and increased distributions, concentrated spending on contracted projects and abandoned Lake Charles LNG when management concluded the expected returns did not justify ET’s capital.
The rapid expansion into data-center natural-gas infrastructure also demonstrates strategic awareness of where incremental demand is developing.
Based on observable corporate decisions rather than personality, I would classify Long’s business and financial intelligence as high.
Energy: High
Long and McCrea are running an enormous organization while simultaneously overseeing billions of dollars of infrastructure development.
ET expects roughly $5.6-$5.9 billion of growth investment in 2026 alone, encompassing natural-gas pipelines, processing facilities, NGL transportation and export infrastructure.
The company is simultaneously integrating acquisitions, expanding exports, negotiating data-center contracts and executing enormous pipeline projects.
The scale and speed of execution suggest a management culture with considerable operating energy.
On Buffett’s familiar integrity, intelligence and energy framework, I therefore see little concern regarding intelligence or energy.
Integrity requires more nuance.
Integrity: Separate Personal Integrity From Corporate Governance
I don’t think investors can reliably declare that a CEO “has integrity” or “doesn’t have integrity” merely by reading annual reports.
What we can examine are incentives, shareholder alignment, disclosure practices, related-party transactions and governance.
On these measures, ET is mixed.
There are strong positives.
Management owns significant amounts of ET units. Executive ownership requirements are substantial. Incentive compensation is tied partly to financial performance.
But ET’s governance is unusually founder-centric.
Kelcy Warren owns 81.2% of the membership interests in ET’s general partner, which controls the partnership. Warren also controls all outstanding Class A voting units. ET’s 2025 10-K calculated Warren’s combined voting interest at approximately 27% as of February 13, 2026. Ordinary ET unitholders cannot elect the general partner’s board in the same way shareholders normally elect directors of a conventional corporation.
That deserves a governance discount.
It doesn’t demonstrate a lack of personal integrity.
But it does mean minority investors have less influence.
There was also a disclosed May 2026 related-party transaction in which an ET subsidiary acquired a business entity owned by Warren in exchange for approximately $22 million of ET common units. The transaction price was based on a 10-day volume-weighted average price. Again, disclosure of a related-party deal is not evidence of wrongdoing, but investors should scrutinize such transactions.
My assessment would therefore be:
Long: no material personal integrity concern emerges from the public information reviewed, but ET’s governance structure itself is weaker than EPD’s and deserves monitoring.
Does Management Have Skin in the Game?
Absolutely.
This is actually one of the strongest elements of the ET investment thesis.
Current data show insiders owning approximately 14% of ET’s common units.
And Kelcy Warren’s personal economic exposure is enormous.
In August 2026 alone, Warren-controlled Kelcy Warren Partners purchased another 1 million ET units at weighted-average prices around $21.26-$21.27, representing an investment of roughly $21 million.
His disclosed direct and indirect holdings total hundreds of millions of ET units.
At current ET prices, his economic exposure is measured in billions of dollars.
That is genuine skin in the game.
When ET’s unit price rises, Warren becomes much wealthier.
When ET permanently destroys shareholder value, Warren loses enormous amounts himself.
Thomas Long Also Has Significant Skin in the Game
Long’s December 2025 Form 4 showed him with approximately 5.02 million ET common units after receiving his latest restricted-unit award.
At roughly $21-$22 per unit, that represents exposure exceeding $100 million.
McCrea similarly owns millions of units; his December 2025 filing showed approximately 7.86 million directly held units following his latest award, plus additional indirect ownership.
These executives are not simply earning salaries while shareholders absorb the risk.
Their wealth is materially linked to ET.
Does Energy Transfer Have a Stock-Option Bonus Plan?
Not exactly.
Energy Transfer’s executive incentive system is actually more interesting than a conventional stock-option program.
The company primarily uses restricted units (RSUs) and cash restricted units (CRSUs) rather than relying predominantly on traditional stock options.
For 2025, Long and McCrea each received 704,438 restricted ET units plus 234,812 cash restricted units. The RSUs generally vest 60% after three years and the remaining 40% after five years, while the cash restricted units generally vest over three years.
So the executives benefit directly when ET units appreciate.
But there is a weakness.
These awards are predominantly time-vested rather than purely performance-vested.
That means executives don’t necessarily have to outperform a benchmark over five years before receiving them.
ET partially addresses this by adjusting the size of awards according to its relative total-unitholder-return performance, but I would prefer an even greater portion of compensation to depend directly on long-term performance metrics.
The Executive Compensation Is Very Large
Long’s reported 2025 total compensation was approximately $20.08 million.
McCrea’s was approximately $20.08 million.
For Long, approximately $15.8 million came from equity awards and approximately $2.72 million from non-equity incentive compensation.
Their 2025 annual bonus targets increased to 175% of base earnings, and their long-term incentive targets increased from 900% to an extraordinary 1,000% of annual base earnings.
That is extremely generous compensation.
But shareholders should distinguish between high compensation and poorly aligned compensation.
The second question matters more.
ET’s annual bonus pool is heavily based on operating performance, including Adjusted EBITDA and distributable cash flow. The framework uses approximately 60% Adjusted EBITDA, 25% DCF and 15% departmental-budget performance, with no funded pool if EBITDA performance falls below an established threshold.
In addition, ET’s executive ownership guidelines require the CEO/Co-CEOs to own units worth at least six times base salary, and unvested awards do not count toward satisfying that ownership threshold.
That’s an important positive.
I would describe ET’s compensation plan as:
generous but reasonably shareholder-aligned, with room for improvement through greater use of true performance-vesting.
Kelcy Warren: Intelligence, Energy and Alignment
Kelcy Warren deserves separate consideration because ET would not exist in anything resembling its present form without him.
Strategically, his track record is remarkable.
Energy Transfer began in 1996 with a relatively small Texas pipeline operation and developed into a network containing approximately 140,000 miles of infrastructure across most of America.
Whatever criticisms one might have about leverage or historical dealmaking, building an infrastructure empire of this scale requires extraordinary commercial intelligence, persistence and appetite for execution.
His energy is difficult to question.
His intelligence as an asset builder is also difficult to question.
His enormous ET ownership demonstrates exceptional shareholder alignment economically.
The issue is governance.
Warren’s control is so substantial that outside unitholders effectively must trust his judgment more than shareholders normally would at a conventional corporation.
That is both ET’s strength and its weakness.
Why ET Still Trades at a Discount
I believe ET’s valuation discount largely reflects four things.
First is its historical reputation for aggressive spending and leverage.
Second is the 2020 distribution cut.
Third is the complicated MLP structure and K-1 tax reporting.
Fourth is the founder-controlled governance arrangement.
Those concerns are legitimate.
But today’s ET is increasingly different from the company that created that reputation.
Leverage has become more controlled.
Growth projects increasingly have long-term contracts behind them.
Management targets mid-teens project returns.
The distribution has now been increased repeatedly.
And management demonstrated willingness to walk away from Lake Charles LNG rather than pursue growth simply for growth’s sake.
The question for investors is therefore whether ET deserves to remain at such a large valuation discount indefinitely.
I increasingly think the answer is no.
The Distribution Is Another Major Attraction
ET currently pays approximately $1.36 per unit annually, producing a yield around 6.3% at current prices.
Management has targeted long-term distribution growth of approximately 3-5% annually.
Suppose ET simply produced:
6.3% starting income,
roughly 3-5% annual distribution growth,
and modest underlying EBITDA growth.
Even without valuation expansion, that combination can produce attractive long-term returns.
But if ET eventually receives even a partial rerating toward peer EV/EBITDA multiples, investors could receive an additional source of return.
I would not assume ET will ever deserve WMB’s 17× multiple or TRGP’s 15×.
Nor does it need to.
Moving from roughly 8× EBITDA toward even 9-10× over time while EBITDA continues growing could materially increase equity value.
What Could Go Wrong?
ET’s biggest risk today, in my view, is that management has once again entered a period of extremely heavy capital spending.
The company now expects as much as approximately $5.9 billion in 2026 growth capital.
If projects suffer cost overruns, regulatory delays or weaker-than-expected returns, the valuation discount could prove justified.
The huge Desert Southwest project alone could eventually require billions of dollars.
ET must therefore demonstrate that the current generation of projects truly generates the advertised mid-teens returns.
Leverage must also stay under control.
If debt/EBITDA moves materially above management’s targeted range while growth capital continues accelerating, my opinion would become more cautious.
The distribution is attractive, but I would never evaluate ET merely by its yield.
My Ranking of the Major Midstream Companies Today
For overall growth + valuation + income, I would currently place Energy Transfer near the top of the group.
For maximum financial quality and lower business risk, I prefer Enterprise Products Partners.
For maximum current income and an exceptionally low P/E, MPLX is extremely compelling.
For maximum growth regardless of valuation, Targa Resources deserves serious consideration.
For investors wanting conventional C-Corp taxation rather than an MLP/K-1, ONEOK, Kinder Morgan and Williams become more attractive structurally.
But at today’s prices, I would have difficulty paying approximately 30× earnings for Williams or 28× for Targa when ET offers significant growth at approximately 14-15× earnings and roughly 8× EBITDA.
Final Verdict: Is Energy Transfer a Better Investment?
For the price being paid today, I believe Energy Transfer is one of the most attractive large-cap midstream investments.
It does not have the absolute lowest P/E.
MPLX and EPD are slightly cheaper by that measure.
It does not have the safest balance sheet.
EPD is clearly stronger.
It doesn’t have the absolute highest growth.
Targa can rival or exceed ET operationally.
But when I combine everything—
growth, infrastructure moat, cash yield, natural-gas opportunities, NGL exports, data-center exposure, management ownership and valuation—ET may currently offer the strongest overall risk/reward combination.
The strongest bull argument is simple:
ET is producing growth that resembles a premium midstream company while trading at a valuation that still resembles a discounted midstream company.
That discrepancy is where the opportunity lies.
My qualitative assessment would be:
Growth: Excellent
Competitive moat: Excellent
Valuation: Excellent on EV/EBITDA; good on P/E
Distribution/income: Excellent
Balance sheet: Good, but not best-in-class
Management intelligence: High
Management energy/execution: High
Management skin in the game: Exceptional
Compensation alignment: Good, though very generous
Governance: Below EPD and conventional corporations
Overall risk at today’s valuation: Moderate
Overall risk/reward: Very attractive
For a conservative investor whose highest priority is avoiding permanent capital loss, I would still lean toward EPD over ET.
For an investor willing to accept somewhat more leverage and governance complexity in exchange for considerably greater growth potential and a lower enterprise valuation, however, I would currently favor ET.
In other words:
EPD may be the better company from a pure quality perspective. ET may be the better-priced investment.
And at approximately 8× EBITDA while adjusted EBITDA is growing rapidly and the company is building long-duration natural-gas and export infrastructure, Energy Transfer deserves considerably more attention than its 6%+ yield alone suggests.
