EPD or DINO: Which Energy Stock Boasts Better Prospects?

Enterprise Products Partners LP EPD and HF Sinclair Corporation DINO are two players in the broader energy space. Although their focus of operations is different, with Enterprise Products being a midstream major and HF Sinclair being mostly a refinery operator, energy investors often choose between EPD and DINO when making an investment decision.

It is to be noted that in the past year, HF Sinclair has soared 33.6%, while Enterprise Products, the bigger player in terms of market capitalization, gained merely 6.1%.

One-Year Price Chart

However, before getting to the investment conclusions, let’s analyze the stocks’ broader business outlook and valuations.

Enterprise Products’ Relatively Stable Business

Enterprise Products generates stable cash flows and is relatively immune to the volatility in oil and natural gas prices. The partnership has a pipeline network that covers more than 50,000 miles, transporting natural gas, crude, petrochemicals, NGLs and refined products.

EPD is also well-positioned to generate additional cash flows from its major capital projects worth $5.1 billion that are under construction, as mentioned in its recent investor deck. Some of the notable projects that are not yet in service are Mentone West 2 and Athena, among others.

The Mentone West 2 project signifies the partnership’s natural gas processing plant in Delaware with a daily capacity of 300 MMcf/d. Enterprise Products expects the development to come into service by the first half of 2026. The Athena project reflects gas processing in Midland with a capacity of 300 MMcf/d.

DINO Set to Profit From Strong Margins

HF Sinclair is a well-known operator of refineries located in Wyoming, Oklahoma, Washington, New Mexico, Utah and Kansas. On its third-quarter earnings call, DINO expressed optimism about a favorable refining business environment in the near future.

The company also stated that strong global refining fundamentals are being supported by handsome utilization rates, low inventories of products and outages of refineries in Russia. To capitalize on this trend, HF Sinclair is focusing on producing distillates, representing diesel and jet fuel.

DINO highlighted that the supply of distillates is falling short of meeting demand, which is contributing to the rising prices of jet fuel and diesel. The company is well-positioned to gain since it is the leading producer of these fuels, depicting a strong outlook.

EPD or DINO: Which Stock Should Investors Focus on?

Risk-averse investors might watch Enterprise Products because the partnership is fairly resistant to the unpredictable energy market. However, investors willing to take risks could retain HF Sinclair stock to benefit from higher margins.

Coming to the valuation snapshot, it has become evident that investors are willing to pay a premium for EPD over DINO. This is reflected by the fact that Enterprise Products trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.60X, which is above DINO’s 6.37X.

To conclude, the choice between the two ultimately depends on an investor’s risk-taking capacity. Currently, both EPD and DINO carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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