Is Energy Transfer Stock a Buy Now?

Key Points

• Growth investors might like other stocks more, but Energy Transfer's growth prospects look good.

• This LP's valuation is one of the lowest in the midstream energy industry, a big plus for value investors.

• Income investors should love Energy Transfer's ultra-high distribution yield.

• 10 stocks we like better than Energy Transfer ›

Energy Transfer LP (NYSE: ET) ranks among the leaders in the North American midstream energy industry. It operates more than 140,000 miles of pipelines that transport natural gas, natural gas liquids, and crude oil.

This limited partnership (LP) has delivered a total return over the last five years that has trounced both the S&P 500 and the energy sector. But is Energy Transfer stock a buy now?

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Image source: Getty Images.

For growth investors: A definite maybe

Many growth investors could turn up their noses at the thought of buying Energy Transfer. To be sure, it's not hard to identify plenty of tech stocks that will likely deliver much stronger growth over the next decade than this midstream energy stock.

Wall Street isn't overly exuberant about Energy Transfer's growth prospects, either. The consensus among analysts surveyed by S&P Global Intelligence is that the LP's revenue will grow by around 8.4% next year, with earnings increasing by 9.6%. Although those are solid numbers, they're nothing to get excited about -- especially with analysts projecting the S&P 500's earnings will jump nearly 13.7% higher.

However, Energy Transfer's business is booming. In its latest quarter, the LP set new records for midstream gathered volumes, crude oil transportation, NGL transportation volumes, and NGL exports. It's also investing in multiple projects that should drive future growth, including a 1.5 billion cubic feet per day expansion to the Transwestern Pipeline.

Data centers present a huge growth opportunity for Energy Transfer. The skyrocketing demand for artificial intelligence (AI) continues to spur the construction of new data centers that consume massive amounts of electricity. As of the second quarter of 2025, Energy Transfer had around 200 requests to connect to data centers in 15 states. The LP has also signed an agreement with CloudBurst to provide natural gas to its data centers in Central Texas.

It's important to keep in mind that Energy Transfer's distribution (which we'll discuss shortly) significantly boosts its total returns. I think that this stock is a definite maybe for growth investors with all things considered.

For value investors: A solid yes

We can go from a maybe to a solid yes for value investors, though. Energy Transfer's units trade at a forward earnings multiple of 10.2, lower than most of its rivals. Its price/earnings-to-growth (PEG) ratio, which is based on five-year earnings growth projections, is 0.75. Any PEG ratio below 1 is considered to be an attractive valuation.

The LP's management team prefers another valuation metric: enterprise value to earnings before interest, taxes, depreciation, and amortization (EBITDA). Using this metric, Energy Transfer has the second-lowest valuation in its peer group.

For income investors: An enthusiastic absolutely

Is Energy Transfer a stock for income investors to buy right now? I think the answer is an enthusiastic absolutely.

The LP's distribution yield stands at a lofty 7.48%. That's one of the highest yields in the midstream energy industry. No peer of Energy Transfer with a market cap of its size or larger offers a higher distribution yield.

This distribution appears to be quite sustainable, too. Energy Transfer maintains ample distribution coverage with its distributable cash flow. The LP believes that its financial position is the strongest in its history. Leverage ratios are in the lower half of the target range of 4 to 4.5. Energy Transfer's management expects to grow the distribution by 3% to 5% per year.

Could Energy Transfer's distribution hit a rough patch in the future? Maybe. The LP did cut its distribution during the worst of the COVID-19 pandemic with the devastating toll it took on the energy sector.

However, Energy Transfer quickly restored the distribution to its previous level and has grown the distribution since. Barring another catastrophic event of such a great magnitude, I think the LP's distribution will remain very appealing to income investors.

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Keith Speights has positions in Energy Transfer. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.