Avista shares fell by -2.4% during the day's evening session, and are now trading at a price of $37.75. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Avista's Valuation Is in Line With Its Sector Averages:
Avista Corporation, together with its subsidiaries, operates as an electric and natural gas utility company. 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, Avista has a trailing 12 month P/E ratio of 20.3 and a P/B ratio of 1.19.
Avista's PEG ratio is 2.65, 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 May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2020-02-26 | 2021-02-24 | 2022-02-23 | 2023-02-22 | |
|---|---|---|---|---|
| Revenue (MM) | $1,346 | $1,322 | $1,439 | $1,710 |
| Gross Margins | 67.3% | n/a | n/a | n/a |
| Operating Margins | 17.1% | 17.6% | 15.9% | 11.1% |
| Net Margins | 14.64% | 9.8% | 10.24% | 9.07% |
| Net Income (MM) | $197 | $129 | $147 | $155 |
| Net Interest Expense (MM) | -$104 | -$105 | -$106 | -$119 |
| Depreciation & Amort. (MM) | -$206 | -$224 | -$232 | -$253 |
| Earnings Per Share | $2.97 | $1.9 | $2.1 | $1.86 |
| EPS Growth | n/a | -36.03% | 10.53% | -11.43% |
| Diluted Shares (MM) | 66 | 68 | 70 | 76 |
| Free Cash Flow (MM) | $841 | $735 | $707 | $576 |
| Capital Expenditures (MM) | -$443 | -$404 | -$440 | -$452 |
| Net Current Assets (MM) | -$3,838 | -$4,028 | -$4,264 | -$4,361 |
| Current Ratio | 0.57 | 0.68 | 0.48 | 0.75 |
| Long Term Debt (MM) | $1,895 | $2,060 | $1,950 | $2,333 |
| Net Debt / EBITDA | 4.46 | 4.98 | 5.2 | 5.14 |
Avista has growing revenues and a flat capital expenditure trend and a steady stream of strong cash flows. Additionally, the company's financial statements display wider gross margins than its peer group and average operating margins with a negative growth trend. However, the firm suffers from declining EPS growth and a highly leveraged balance sheet.
