Is the Bullish Sentiment on Exelon (EXC) Justified?

Exelon may be overvalued with poor growth indicators, but the 14 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $39.0 to $48.0 per share, for an average of $45.32. At today's price of $39.97, Exelon is trading -11.8% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Exelon Corporation, a utility services holding company, engages in the energy distribution and transmission businesses in the United States and Canada. Based in Chicago, IL, the large-cap Utilities company has 19,063 full time employees. Exelon has offered a 3.4% dividend yield over the last 12 months.

Exelon has a trailing twelve month P/E ratio of 17.7, compared to an average of 22.89 for the Utilities sector. Based on its EPS guidance of 2.51, the company has a forward P/E ratio of 15.9. Based on the average compound growth rate of Exelon's historical and projected earnings per share, which is -3.6%, the company's PEG ratio is -5.16. This indicates that its shares are overvalued.

Furthermore, Exelon is likely overvalued compared to its book value, since its P/B ratio of 1.59 is higher than the sector average of 1.03. The company's shares are currently trading 11.9% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the stock a good rating, it's likely that they are looking beyond simple valaution metrics and attempting to forecast the company's growth potential. For example, Exelon has wide margins as you can see in the financial summary below.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $34,438 $33,039 $17,938 $19,078
Gross Margins 30.0% 28.8% 39.1% 42.1%
Operating Margins 12.6% 8.5% 15.0% 17.4%
Net Margins 8.53% 5.94% 9.51% 11.37%
Net Income (MM) $2,936 $1,963 $1,706 $2,170
Net Interest Income -$1,616,000 -$1,635,000 -$1,289,000 -$1,447,000
Depreciation & Amort. -$5,780,000 -$6,527,000 -$6,434,000 -$3,533,000
Earnings Per Share $3.01 $2.01 $1.74 $2.26
EPS Growth n/a -33.22% -13.43% 29.89%
Diluted Shares (MM) 974 977 980 995
Free Cash Flow (MM) -$589 -$3,813 -$4,969 -$2,277
Capital Expenditures (MM) -$7,248 -$8,048 -$7,981 -$7,147
Net Current Assets (MM) -$78,367 -$81,887 -$84,261 -$63,269
Current Ratio 0.85 0.98 0.87 0.69
Long Term Debt (MM) $31,719 $35,483 $31,139 $35,662
Net Debt / EBITDA 3.35 3.68 3.58 5.29
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.