It's been a great evening session for Williams Companies investors, who saw their shares rise 2.2% to a price of $34.44 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:
The Williams Companies, Inc., together with its subsidiaries, operates as an energy infrastructure company primarily in the United States. 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, Williams Companies has a trailing 12 month P/E ratio of 16.2 and a P/B ratio of 3.6.
Williams Companies's PEG ratio is 4.79, 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.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2020-02-24 | 2021-02-24 | 2022-02-28 | 2023-02-27 | |
|---|---|---|---|---|
| Revenue (MM) | $8,201 | $7,719 | $10,627 | $10,965 |
| Gross Margins | 76.1% | 79.1% | 62.1% | 68.5% |
| Operating Margins | 29.2% | 33.3% | 24.8% | 27.5% |
| Net Margins | 10.36% | 2.73% | 14.27% | 18.69% |
| Net Income (MM) | $850 | $211 | $1,517 | $2,049 |
| Net Interest Expense (MM) | -$1,186 | -$1,172 | -$1,179 | -$1,147 |
| Depreciation & Amort. (MM) | -$1,714 | -$1,721 | -$1,842 | -$2,009 |
| Earnings Per Share | $0.7 | $0.17 | $1.24 | $2.12 |
| EPS Growth | n/a | -75.71% | 629.41% | 70.97% |
| Diluted Shares (MM) | 1,214 | 1,215 | 1,218 | 1,218 |
| Free Cash Flow (MM) | $5,842 | $4,771 | $5,192 | $7,172 |
| Capital Expenditures (MM) | -$2,149 | -$1,275 | -$1,247 | -$2,283 |
| Net Current Assets (MM) | -$28,096 | -$28,154 | -$28,962 | -$30,591 |
| Current Ratio | 0.4 | 0.62 | 0.91 | 0.78 |
| Long Term Debt (MM) | $20,148 | $21,451 | $21,650 | $21,927 |
| Net Debt / EBITDA | 6.44 | 7.34 | 5.46 | 4.76 |
Williams Companies benefits from growing revenues and a flat capital expenditure trend, strong margins with a stable trend, and exceptional EPS growth. The company's financial statements show a steady stream of strong cash flows and wider gross margins than its peer group. However, the firm has a highly leveraged balance sheet.
