DTE Energy Co (DTE, Financial) recorded a daily gain of 1.96%, despite a 3-month loss of -11.78%. With an Earnings Per Share (EPS) of 6.43, the question arises; is the stock modestly undervalued? This article presents a comprehensive valuation analysis of DTE Energy Co, providing insights into the company's financial strength, profitability, and growth.
Company Introduction
DTE Energy Co, which primarily operates in Michigan, contributes 90% of earnings through its two regulated utilities. DTE Electric serves approximately 2.3 million customers in southeastern Michigan, including Detroit. DTE Gas serves 1.3 million customers throughout the state. The company also has non-utility businesses and investments that include energy marketing and trading, renewable natural gas facilities, and on-site industrial energy projects. With a market cap of $20.10 billion, DTE Energy Co's stock is currently priced at $97.36 per share, which is modestly undervalued compared to the GF Value of $133.73.
Summarizing GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
DTE Energy Co's stock appears to be modestly undervalued according to the GF Value calculation. Given its current price of $97.36 per share and a market cap of $20.10 billion, the long-term return of the stock is likely to be higher than its business growth due to its relative undervaluation.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, a company's financial strength should be carefully reviewed before deciding to buy shares. DTE Energy Co has a cash-to-debt ratio of 0, which ranks worse than 0% of 480 companies in the Utilities - Regulated industry. Based on this, GuruFocus ranks DTE Energy Co's financial strength as 4 out of 10, suggesting a poor balance sheet.
Profitability and Growth
Profitable companies, especially those with consistent profitability over the long term, pose less risk for investors. DTE Energy Co has been profitable 10 over the past 10 years, with a revenue of $16.20 billion and Earnings Per Share (EPS) of $6.43 over the past twelve months. Its operating margin is 12.88%, which ranks better than 51.9% of 501 companies in the Utilities - Regulated industry. Overall, GuruFocus ranks the profitability of DTE Energy Co at 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. DTE Energy Co's 3-year average revenue growth rate is better than 72.14% of 481 companies in the Utilities - Regulated industry. However, its 3-year average EBITDA growth rate is 2.6%, which ranks worse than 58.24% of 455 companies in the Utilities - Regulated industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to assess profitability. For the past 12 months, DTE Energy Co's return on invested capital is 4.59, and its cost of capital is 5.56.
Conclusion
In summary, DTE Energy Co (DTE, Financial) appears to be modestly undervalued. Despite its poor financial condition, the company has demonstrated fair profitability. However, its growth ranks worse than 58.24% of 455 companies in the Utilities - Regulated industry. For more insights on DTE Energy Co's stock, check out its 30-Year Financials here.
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