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 0.22%, juxtaposed with a three-month change of 11.84%. 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: 8/10
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 $45.86 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, focusing on its core regulated utility operations.
Financial Strength Breakdown
PG&E Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0.69 positions it worse than 95.86% of companies in the Utilities - Regulated industry. This ratio, which measures how easily a company can pay interest on outstanding debt, is far below the preferred benchmark set by Benjamin Graham.
The Altman Z-Score of 0.44 indicates a high risk of financial distress, and the cash-to-debt ratio at 0.01 suggests difficulties in managing debt levels. Furthermore, the debt-to-equity ratio of 2.32 and a debt-to-Ebitda ratio of 8.81 are both concerning, indicating a potential over-reliance on borrowing.
Profitability Breakdown
PG&E Corp's Profitability rank of 5/10 reflects average performance. While the company maintains a stable operating margin of 7.54%, this figure alone does not paint the full picture of the company's profitability potential. Investors should consider this rank in conjunction with other financial metrics to assess the company's ability to generate profits relative to its peers.
Growth Prospects
A lack of significant growth is another area where PG&E Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by an average of 32.1% per year over the past three years, which is worse than 98.35% of companies in the Utilities - Regulated industry. This decline in revenue, coupled with a one-star predictability rank, adds to investor uncertainty regarding the consistency of revenue and earnings.
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. The company's challenges in managing debt, coupled with its lackluster growth prospects, may hinder its ability to outperform in the future. Investors should weigh these factors carefully when evaluating PG&E Corp as a potential investment.
For those seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the following screener link: 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.
