Long-established in the Utilities - Regulated industry, PG&E Corp (PCG, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.14%, juxtaposed with a three-month change of 11.06%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of PG&E Corp.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 3/10
- Profitability rank: 5/10
- Growth rank: 1/10
- GF Value rank: 1/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned PG&E Corp the GF Score of 55 out of 100, which signals poor future outperformance potential.
Understanding PG&E Corp's Business
PG&E Corp, with a market cap of $45.9 billion and sales of $22.76 billion, operates primarily through its main subsidiary, Pacific Gas and Electric. This regulated utility serves 5.3 million electricity customers and 4.6 million gas customers across Central and Northern California. The company has navigated through bankruptcy court supervision from January 2019 to June 2020. In 2004, PG&E Corp sold its unregulated assets as part of an earlier post-bankruptcy reorganization. With an operating margin of 7.54%, PG&E Corp's financial landscape is complex and has faced significant challenges in recent years.
Financial Strength Breakdown
PG&E Corp's financial strength indicators present some concerning insights about the company's balance sheet health. With an interest coverage ratio of 0.69, PG&E Corp is positioned worse than 95.85% of its industry peers. This ratio, which is significantly below the preferred benchmark set by Benjamin Graham, highlights potential challenges the company might face when handling its interest expenses on outstanding debt.
The company's Altman Z-Score is just 0.44, indicating a risk of financial distress, while its low cash-to-debt ratio at 0.01 suggests difficulties in managing debt levels. Furthermore, a high debt-to-equity ratio of 2.32 and a debt-to-Ebitda ratio of 8.81, both worse than the majority of the industry, underscore the company's potential vulnerability to market fluctuations and financial strain.
Profitability Breakdown
PG&E Corp's Profitability rank of 5/10 is a cause for concern. The company's Operating Margin has seen a significant decline over the past five years, with a downward trend from 7.83% in 2019 to 8.69% in 2023. This decline indicates the company's struggles to maintain profitability amidst operational challenges.
Similarly, PG&E Corp's Gross Margin has also decreased over the same period, reflecting difficulties in converting revenue into profits. These trends are critical as they directly impact the company's bottom line and its ability to generate returns for shareholders.
Growth Prospects
The company's growth trajectory is also a concern, with a Growth rank of 1/10. PG&E Corp's revenue has declined by an average of -32.1% per year over the past three years, which is significantly lower than 98.35% of companies in the Utilities - Regulated industry. This stagnation in revenue growth could be a red flag for investors looking for companies with strong growth potential.
Moreover, the company's one-star predictability rank adds to the uncertainty regarding its revenue and earnings consistency, which is crucial for making informed investment decisions.
Next Steps
Considering PG&E Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should be cautious and consider these factors when evaluating the company's future prospects. For those seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
