Is Southwest Gas (SWX) Overpriced?

Southwest Gas may be overvalued with poor growth indicators, but the 4 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $62.0 to $87.0 per share, for an average of $69.5. At today's price of $57.8, Southwest Gas is trading -16.84% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Southwest Gas Holdings, Inc., through its subsidiaries, distributes and transports natural gas in Arizona, Nevada, and California. Based in Las Vegas, NV, the mid-cap Utilities company has 13,359 full time employees. Southwest Gas has offered a 4.3% dividend yield over the last 12 months.

Southwest Gas does not have a meaningful trailing P/E ratio since its earnings per share are currently in the red. Based on its EPS guidance of 3.3, the company has a forward P/E ratio of 17.5. In comparison, the average P/E ratio for the Utilities sector is 22.89. Furthermore, Southwest Gas is likely overvalued compared to its book value, since its P/B ratio of 1.25 is higher than the sector average of 1.03.

If analysts are willing to give the company a decent rating despite its valuation issues, its likely that they put significant weight behind Southwest Gas's growth potential, as signaled by its 12.3% rate of revenue growth and capital expenditures that are growing at -2.2% on average each year.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $3,120 $3,299 $3,680 $4,960
Gross Margins 23.6% 24.8% 22.3% 20.1%
Operating Margins 100.0% 12.8% 29.6% 23.1%
Net Margins 6.86% 7.04% 5.46% -4.1%
Net Income (MM) $214 $232 $201 -$203
Net Interest Income -$102,870 -$107,462 -$114,085 -$226,567
Depreciation & Amort. -$303,237 -$332,027 -$253,398 -$263,043
Earnings Per Share $3.94 $4.14 $3.39 -$4.01
EPS Growth n/a 5.08% -18.12% -218.29%
Diluted Shares (MM) 54 56 59 71
Free Cash Flow (MM) -$438 -$199 -$604 -$452
Capital Expenditures (MM) -$938 -$825 -$716 -$859
Net Current Assets (MM) -$4,720 -$5,024 -$8,000 -$6,271
Current Ratio 0.8 0.96 0.52 1.08
Long Term Debt (MM) $2,300 $2,732 $4,116 $4,403
Net Debt / EBITDA 3.88 3.79 10.03 27.85
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.