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Nicholas Kitonyi
Nicholas Kitonyi
Articles (409)  | Author's Website |

Does DTE Energy Have More Room to Run?

The stock has pulled back more than 10%

February 19, 2021 | About:

Shares of DTE Energy Co. (NYSE:DTE) on Friday gained marginally to trade at around $120.70 following the announcement of its fourth-quarter and full-year 2020 results.

DTE Energy's stock has pulled back more than 10% over the last three months after peaking in November. However, its market value is still up more than 57% since bottoming in March. The current pullback could be an opportunity to buy, especially after last year's strong performance.

DTE Energy also recently announced that it is close to spinning off its midstream business. This could help improve profitability margins as utility businesses eye more recovery in 2021.

Highlights from recent quarterly results

For the full year, DTE Energy posted diluted earnings of $1.4 billion, or $7.08 per share, up from $1.2 billion, or $6.31, posted in the previous year. The company's operating earnings per share of $7.19 outperformed the midpoint guidance of $6.61.

The company is looking to tap into the rapidly growing renewable energy market for future growth. DTE Energy last month announced a first-of-its-kind program that will allow its customers to reduce domestic carbon emissions by 25% to 100%.

Its renewable energy program, MIGreenPower, which now has 25,000 commitments, reached 45 million kilowatt-hours of renewable energy generation in 2020. This is in line with its goal of increasing clean energy generation and reducing carbon emissions.

The company also reaffirmed its earnings guidance for fiscal 2021 with an earnings per share projection of $6.88 to $7.26. DTE Energy Senior Vice President and Chief Financial Officer David Ruud said that the company delivered a strong performance in both utility and non-utility businesses last year.

"We are well-positioned for another solid year in 2021 as we continue to invest in reliability and infrastructure improvements for our customers," he said.

Valuation

From a valuation perspective, shares of DTE Energy are trading at a trailing price-earnings ratio of 17. This is slightly higher than the Peter Lynch fair valuation of 15. The company's forward price-earnings ratio of 16.76 is a slight improvement, which suggests that earnings per share are expected to be in line with last year's figure of $7.08 or slightly better.

Looking at close peers, DTE Energy has better valuation multiples compared to CMS Energy Corp.'s (NYSE:CMS) trailing and forward price-earnings ratios of 22.50 and 18.52. On the other hand, Avangrid Inc. (NYSE:AGR) trades at an equivalent trailing price-earnings ratio of 22 and a forward price-earnings ratio of 20.44. America's fourth-largest regulated electric utility company, American Electric Power Co. (NASDAQ:AEP), trades at a trailing price-earnings ratio of 20.83 and a forward price-earnings ratio of 17.89.

In summary, shares of DTE Energy appear to be relatively undervalued when compared to close peers. This suggests that there could be more room to run in 2021.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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