PG&E Corp (PCG, Financial) recently reported a daily loss of -1.46% and a 3-month gain of 0.38%. With an Earnings Per Share (EPS) (EPS) of 0.91, the question arises - is the stock significantly overvalued? This article aims to provide a comprehensive valuation analysis of PG&E Corp (PCG) to answer that question. Let's delve into the details.
PG&E is a holding company whose main subsidiary, Pacific Gas and Electric, operates in Central and Northern California. Serving 5.3 million electricity customers and 4.6 million gas customers in 47 of the state's 58 counties, PG&E has a rich history and significant presence in the utilities industry. With a stock price of $16.89 and a GF Value of $12.43, it's crucial to assess whether the stock is fairly priced.
Understanding the GF Value
The GF Value represents the intrinsic value of a stock, derived from an exclusive methodology. The GF Value Line on our summary page provides an overview of the stock's fair trading value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates.
PG&E (PCG, Financial) appears to be significantly overvalued according to the GuruFocus Value calculation. With a current price of $16.89 per share and a market cap of $42.20 billion, PG&E stock seems to be trading above its fair value. As a result, the long-term return of its stock is likely to be lower than its future business growth.
Assessing PG&E's Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. PG&E has a cash-to-debt ratio of 0.01, which ranks lower than 95.26% of 485 companies in the Utilities - Regulated industry. This indicates that the financial strength of PG&E is poor.
Profitability and Growth
Consistent profitability over the long term usually indicates a lower risk for investors. PG&E has been profitable 6 times over the past 10 years, with an operating margin of 9.35%, which ranks lower than 56.72% of 506 companies in the Utilities - Regulated industry. This indicates fair profitability.
Growth is one of the most important factors in a company's valuation. PG&E's average annual revenue growth is -32.1%, which ranks lower than 98.56% of 486 companies in the Utilities - Regulated industry. Its 3-year average EBITDA growth is 0%, which ranks lower than 0% of 459 companies in the Utilities - Regulated industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can determine its profitability. PG&E's ROIC is 7.59, and its WACC is 6.37, implying the company is creating value for shareholders.
In conclusion, PG&E (PCG, Financial) appears to be significantly overvalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks lower than 0% of 459 companies in the Utilities - Regulated industry. To learn more about PG&E stock, you can check out its 30-Year Financials here.
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