We've been asking ourselves recently if the market has placed a fair valuation on Exelon. Let's dive into some of the fundamental values of this large-cap Utilities company to determine if there might be an opportunity here for value-minded investors.
A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:
Exelon Corporation, a utility services holding company, engages in the energy distribution and transmission businesses in the United States and Canada. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 22.89 and an average price to book (P/B) ratio of 1.03. In contrast, Exelon has a trailing 12 month P/E ratio of 17.9 and a P/B ratio of 1.6.
Exelon's PEG ratio is 2.73, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company's Revenues Are Declining:
| 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 Expense (MM) | -1,616 | -1,635 | -1,289 | -1,447 |
| Net Interest Expense (MM) | -$1,616 | -$1,635 | -$1,289 | -$1,447 |
| Depreciation & Amort. (MM) | -$5,780 | -$6,527 | -$6,434 | -$3,533 |
| 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 |
Exelon suffers from declining revenues and a flat capital expenditure trend, slimmer gross margins than its peers, and declining EPS growth. The firm's financial statements also exhibit negative and highly variable cash flows and a highly leveraged balance sheet. On the other hand, the company has average operating margins with a positive growth rate working in its favor.
