Southwest Gas Holdings (SWX): Valuation Insights Following Centuri Sale and Refocus on Utilities

Southwest Gas Holdings (SWX) just wrapped up the sale of its entire stake in Centuri Holdings, a move that is turning heads among investors. By cashing out of Centuri, Southwest Gas is aiming to zero in on its bread-and-butter utility business, providing a clear signal about where leadership sees future value. Shortly after completing the sale, the stock caught an upgrade from BofA Securities, with analysts citing an improved risk/reward balance and new focus on the company’s core operations.

This reshuffling comes after a relatively steady year for Southwest Gas. Shares are up roughly 12% in the past year and have gained momentum, rising 8% in the past 3 months and 12% year-to-date. The company has also posted annual revenue growth of 7% and net income growth of 18%, suggesting the business is in solid shape as it pivots toward utilities. While there have been some short-term dips, investors seem to be weighing the benefits of a streamlined strategy against the risks of letting go of a long-held asset.

Now that Southwest Gas is putting all its chips on the core utility segment, the real question is whether this sharper focus is still undervalued or if the market has already priced in the next chapter of growth.

Most Popular Narrative: 4.8% Undervalued

According to the most widely followed narrative, Southwest Gas Holdings’ shares are currently trading at a nearly 5% discount to fair value. The valuation is built on forward-looking assumptions around demand growth, margin expansion, and large-scale project execution.

Accelerated infrastructure investment opportunities, exemplified by the Great Basin pipeline expansion project with potential $1.2 to $1.6 billion in new capital expenditures, are expected to drive significant rate base growth, supporting higher future regulated revenue and earnings. Favorable regulatory developments such as Nevada's new alternative ratemaking legislation and progress on formula rates in Arizona and California provide visibility into faster cost recovery and mitigated regulatory lag. This should enhance margin stability and earnings predictability.

Curious what’s powering this bullish take? The consensus narrative is anchored by optimistic assumptions about future profit margins, major infrastructure bets, and the pace at which regulation keeps costs in check. If you want to uncover the specifics behind the forward earnings picture and just how bold these future projections are, this is one deep dive you won’t want to miss.

Result: Fair Value of $82.5 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, shifts in energy policy or execution hiccups on major projects could quickly undermine these optimistic projections and change the company’s valuation outlook.

Find out about the key risks to this Southwest Gas Holdings narrative.

Another View: When Looking at Valuation Ratios

Another angle on Southwest Gas Holdings suggests a less optimistic picture. Compared to the industry, the company trades at a much higher valuation based on earnings. Could this high price point signal the market is expecting more?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Southwest Gas Holdings to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Southwest Gas Holdings Narrative

If you have a different perspective or prefer to dive into the numbers yourself, you can shape your own narrative quickly and easily. Do it your way Do it your way.

A great starting point for your Southwest Gas Holdings research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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