Can There Be More Upside for NextEra Energy (NEE) if It Is Overvalued?

NextEra Energy may be overvalued with mixed growth prospects, but the 16 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $80.0 to $108.0 per share, for an average of $94.24. At today's price of $75.69, NextEra Energy is trading -19.68% away from its average target price, suggesting there is an analyst consensus of some upside potential.

NextEra Energy, Inc. is an American energy company with about 46 gigawatts of generating capacity, revenues of over $17 billion in 2017, and about 14,000 employees throughout the US and Canada. The large-cap Utilities company is based in Juno Beach, FL. NextEra Energy has offered a 2.53% dividend yield over the last 12 months.

NextEra Energy has a trailing twelve month P/E ratio of 36.22, compared to an average of 22.89 for the Utilities sector. Based on its EPS guidance of 3.38, the company has a forward P/E ratio of 22.39. Based on the average annual growth rate of NextEra Energy's historical and projected earnings per share, which is -5.2%, the company's PEG ratio is -6.97. This indicates that its shares are overvalued.

Furthermore, NextEra Energy is likely overvalued compared to its book value, since its P/B ratio of 4.478 is higher than the sector average of 1.03. The company's shares are currently trading 54.56% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are willing to give the company a decent rating despite its valuation issues, its likely that they put significant weight behind NextEra Energy's growth potential, as signaled by its 8.8% rate of revenue growth and capital expenditures that are growing at 14.22% on average each year.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $17,604 $16,976 $19,042 $23,278
Revenue Growth n/a -3.57% 12.17% 22.25%
Gross Margins 63.74% 63.88% 68.09% 70.2%
Gross Margins Growth n/a 0.22% 6.59% 3.1%
Operating Margins 30.41% 30.14% 15.3% 17.53%
Operating Margins Growth n/a -0.89% -49.24% 14.58%
Net Margins 21.41% 17.19% 18.76% 17.82%
Net Margins Growth n/a -19.71% 9.13% -5.01%
Earnings Per Share $7.71 $1.49 $1.82 $2.09
EPS Growth n/a -80.67% 22.15% 14.84%
Diluted Shares (MM) 489 1,960 1,963 1,987
Free Cash Flow (MM) -$2,922 $224 -$277 -$805
FCF Growth n/a 107.67% -223.66% -190.61%
Capital Expenditures (MM) $11,077 $7,759 $7,830 $9,067
Net Debt / EBITDA 1.62 2.4 3.39 3.64
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.