Today we're going to take a closer look at large-cap Utilities company Williams Companies, whose shares are currently trading at $35.02. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
A Very Low P/E Ratio 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 15.7 and a P/B ratio of 3.66.
Williams Companies's PEG ratio is 4.95, 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:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $8,201 | $7,719 | $10,627 | $10,965 |
| Gross Margins | 53.9% | 56.8% | 44.7% | 50.2% |
| Operating Margins | 29.1% | 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 | $2.23 |
| EPS Growth | n/a | -75.71% | 629.41% | 79.84% |
| Diluted Shares (MM) | 1,214 | 1,215 | 1,218 | 1,216 |
| Free Cash Flow (MM) | $1,544 | $2,221 | $2,698 | $2,606 |
| Capital Expenditures (MM) | -$2,149 | -$1,275 | -$1,247 | -$2,283 |
| Net Current Assets (MM) | -$28,096 | -$28,153 | -$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 | 5.39 | 6.98 | 4.36 | 4.04 |
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 wider gross margins than its peer group and consistent free cash flow. However, the firm has a highly leveraged balance sheet.
