Constellation Energy Corporation was one of Wall Street's biggest winners today, outpacing the S&P 500 and Dow Industrial composite indices by 14.9% and 15.3% respectively. The Utility company ended the day at $64.59 closing in on its 52 week high of $68.68 and nearing its average target price of $68.27. In the last year, Constellation energy corporation is up 57.4%, and has outperformed the S&P 500 by 63.2%. The average analyst who follows the stock has given it a rating of buy.
Constellation energy corporation has a trailing 12 month price to earnings (P/E) ratio of 25.8, which corresponds to its share price divided by its trailing earnings per share (Eps) of $2.5. The company's forward P/E ratio is 15.4 based on its forward Eps of $4.2. Earnings refer to the net income of the company from its sales operations, and the P/E tells us how much investors are willing to pay for each dollar of these earnings. By way of comparison, the S&P 500 has historically had an average P/E ratio around 20. Whether the company's P/E ratio is within a high or low range tells us how investors are currently valuing the stock's earning potential, but it doesn't tell us how its price will move un the future.
The company's gross margins are 18.5%, which may indicate that it is operating in a highly competitive market, where it cannot set the prices it desires without losing out on market share. CEG's levered free cashflow is $2,552,375,040. Often touted as a general yardstick for a company's financial health, this number represents the sum of inflows and outflows of cash from all sources, minus all expenses and costs of doing business, including capital expenses. This is the pool of liquidity that the company can use to reinvest in its business and pay its equity investors a dividend. Over the last twelve months investors in CEG have enjoyed a dividend yield of 0.2%.
With strong cashflows and decent margins, CEG will certainly continue to get attention from investors looking to hedge their portfolio against a recession. Traditionally, utilities have performed well through negative economi cycles -- but Constellation's elevated P/E ratio suggests that too many investors have already bought into the same thesis on the stock.
