Think You Missed Out on MPLX? Here's the Biggest Reason You Haven't.

Key Points

• Despite its recent surge, MPLX still trades at an attractive valuation.

• The MLP has lots of growth coming down the pipeline.

• It should have plenty of fuel to continue increasing its high-yielding distribution.

• 10 stocks we like better than MPLX ›

MPLX's (NYSE: MPLX) unit price has surged nearly 20% over the past year. This is impressive for a master limited partnership (MLP) focused on distributing income to its investors.

That surge might have you wondering whether you missed out on your chance to buy the MLP. Here's the top reason why it should have plenty of fuel to continue rising.

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Ample fuel to continue growing value

MPLX currently trades at about 12 times its EV-to-EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization) ratio. That's right in the middle of the pack in the energy midstream sector. It's a compelling price to pay for a company with MPLX's combination of financial strength and growth prospects. That reasonable valuation is why the MLP currently still yields an attractive 7.6%.

The MLP currently has a long list of expansion projects in its backlog. It's building a couple of additional natural gas processing plants, owns interests in joint ventures constructing several new natural gas pipelines (including the recently approved Eiger Express), and has some new NGL fractionators under construction. These projects provide MPLX with earnings growth visibility through the end of the decade.

The company has also been using its strong financial profile to make a series of strategic acquisitions, including recently agreeing to buy Northwind Midstream for $2.4 billion. These deals will provide it with incremental sources of growing income due to the embedded visible growth of the acquired assets.

MPLX's combination of near-term acquisition-fueled growth and long-term growth from organic expansion projects should enable the MLP to grow its EBITDA at a mid-single-digit annual rate for years to come. That should allow the MLP to continue increasing its distribution at or above that level (it has delivered more than 10% compound annual distribution growth since 2021).

With so much growth still coming down the pipeline, you didn't miss out on MPLX. The MLP's combination of income and growth could give it the fuel to produce double-digit annual total returns from here.

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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.