Estimating The Fair Value Of Sempra (NYSE:SRE)
Today we will run through one way of estimating the intrinsic value of Sempra ( NYSE:SRE ) by taking the expected...
Has the U.S. Utilities Sector valuation changed over the past few years?
|Wed, 01 Dec 2021||US$1.1t||US$443.3b||US$39.3b||21.6x|
|Fri, 29 Oct 2021||US$1.2t||US$431.6b||US$41.6b||22.1x|
|Sun, 26 Sep 2021||US$1.1t||US$429.8b||US$42.1b||21.5x|
|Tue, 24 Aug 2021||US$1.2t||US$430.6b||US$42.0b||22.2x|
|Wed, 30 Jun 2021||US$1.1t||US$430.0b||US$42.1b||21.5x|
|Sat, 03 Apr 2021||US$1.1t||US$418.5b||US$40.8b||21.7x|
|Tue, 05 Jan 2021||US$1.1t||US$399.8b||US$35.9b||20.8x|
|Fri, 09 Oct 2020||US$991.7b||US$398.4b||US$36.0b||19.3x|
|Thu, 02 Jul 2020||US$933.8b||US$381.2b||US$42.5b||20.1x|
|Sun, 05 Apr 2020||US$918.0b||US$402.3b||US$35.1b||21.9x|
|Wed, 08 Jan 2020||US$1.1t||US$407.9b||US$40.2b||24x|
|Tue, 01 Oct 2019||US$1.1t||US$400.2b||US$28.8b||24.9x|
|Fri, 05 Jul 2019||US$978.9b||US$400.2b||US$29.9b||24x|
|Mon, 08 Apr 2019||US$947.2b||US$400.8b||US$29.8b||22.9x|
|Thu, 10 Jan 2019||US$843.4b||US$391.2b||US$32.2b||22.4x|
Current Industry PE: Investors are relatively neutral on the industry at the moment, considering it's trading close to its 3-year average PE ratio of 22.2x. It appears they believe that earnings will grow in-line with historical growth rates.
Past Earnings Growth: The earnings for companies in the Utilities industry have declined 3.3% per year over the last three years, while revenues for these companies have grown 4.2% per year. This means that although more sales are being generated, either the cost of doing business or the level of investment back into businesses has increased, which has decreased profits.
Which industries have driven the changes within the U.S. Utilities sector?
Industry PE: Investors are most optimistic about the Renewable Energy industry which is trading above its 3-year average PE ratio of 44.7x. This is likely because analysts are expecting annual earnings growth of 47%, which is higher than its past year's earnings decline of 20% per year. Meanwhile, investors are most pessimistic about the Gas Utilities industry, which is trading below its 3-year average of 20.9x.
Forecasted Growth: Analysts are most optimistic on the Renewable Energy industry, expecting annual earnings growth of 47% over the next 5 years. This is better than its past earnings decline of 20% per year. Meanwhile, the Gas Utilities industry is expected to see its earnings grow by 6.5% per year over the next few years.
WEC Energy Group
SO, DUK, and WEC are well-managed utilities that operate in favorable regulatory environments. Financial debt is considered substantial but well-managed and WEC appears to have a slight edge over DUK and SO. As of today, WEC is still much more reliant on coal-fired plants than SO and DUK and thus likely expected to face relatively-increased capital expenditures going forward. Each of the companies have increased their dividend for roughly 20 years but WEC has outpaced SO's and DUK's growth rate by a wide margin. Neither of the companies are considered bargains in November 2021 but SO currently trades at an acceptable dividend yield. WEC, with its traditionally much lower yield, trades closest to its historic average valuation.
Macquarie Infrastructure Holdings
American Electric Power Company