TransCanada Corporation (USA) (TRP), Enbridge Inc (USA) (ENB), and Is it Time to Invest in Keystone XL?

Enbridge Inc (USA) (NYSE:ENB)’s total debt to equity ratio of 3.23 is much higher than TransCanada Corporation (USA) (NYSE:TRP)’s. Also, Enbridge’s return on investment of 3.1% is lower than TransCanada’s 4.1%. It is important to remember that over the coming years, Enbridge is expanding its network to move more crude through the congested North American market and boost earnings. With expected 2014 EPS of $2.07 it has a forward P/E ratio around 22.

How do these firms compare to large integrated oil firms like Exxon Mobil Corporation (NYSE:XOM)? ExxonMobil is one the vanguards of the 20th century. Its experience and legacy assets have helped to create a return on invested capital of 25.5%, a rate far above the TransCanada Corporation (USA) (NYSE:TRP)’s 3.5% and Enbridge Inc (USA) (NYSE:ENB)’s 2.3%. ExxonMobil is huge company and can’t grow as quickly as smaller firms. Regardless, its mix of oilfields, pipelines and refineries give it steady profits. With an expected 2014 EPS of $8.15 it is trading at a forward P/E ratio around 11, a great deal.

Conclusion

There is a good probability that Keystone XL will be approved. The reality is that pipelines are safer than the alternatives, trains. Overall TransCanada Corporation (USA) (NYSE:TRP) and Enbridge Inc (USA) (NYSE:ENB) are promising investments for energy investors looking for growth. With that being said, they have a huge amount of political risk. The approval of new pipelines is always a political hot potato. Energy investors looking for a more stable investment will find a better fit with Exxon Mobil Corporation (NYSE:XOM)’s diversified global operations.

The article Is it Time to Invest in Keystone XL? originally appeared on Fool.com and is written by Joshua Bondy.

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