Today we're going to take a closer look at large-cap Utilities company Duke Energy, whose shares are currently trading at $87.93. 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!
Duke Energy's Valuation Is in Line With Its Sector Averages:
Duke Energy Corporation, together with its subsidiaries, operates as an energy company 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, Duke Energy has a trailing 12 month P/E ratio of 18.8 and a P/B ratio of 1.46.
Duke Energy's PEG ratio is 2.53, 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:
| 2018-02-23 | 2019-02-28 | 2020-02-20 | 2021-02-25 | 2022-02-24 | 2023-02-27 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $23,565 | $24,521 | $25,079 | $23,366 | $24,621 | $28,768 |
| Gross Margins | 45.0% | 43.0% | 46.0% | 49.0% | 49.0% | 45.0% |
| Operating Margins | 25% | 21% | 23% | 24% | 24% | 22% |
| Net Margins | 13.0% | 11.0% | 15.0% | 6.0% | 16.0% | 9.0% |
| Net Income (MM) | $3,059 | $2,666 | $3,748 | $1,377 | $3,908 | $2,550 |
| Net Interest Expense (MM) | -$1,986 | -$2,094 | -$2,204 | -$2,097 | -$2,207 | -$2,439 |
| Depreciation & Amort. (MM) | -$4,046 | -$4,696 | -$5,176 | -$5,486 | -$5,663 | -$5,843 |
| Earnings Per Share | $4.37 | $3.77 | $5.09 | $1.72 | $4.94 | $3.17 |
| EPS Growth | n/a | -13.73% | 35.01% | -66.21% | 187.21% | -35.83% |
| Diluted Shares (MM) | 700 | 708 | 729 | 738 | 769 | 770 |
| Free Cash Flow (MM) | $14,676 | $16,575 | $19,331 | $18,763 | $18,005 | $17,294 |
| Capital Expenditures (MM) | -$8,052 | -$9,389 | -$11,122 | -$9,907 | -$9,715 | -$11,367 |
| Net Current Assets (MM) | -$87,724 | -$91,844 | -$101,724 | -$104,522 | -$108,367 | -$113,002 |
| Long Term Debt (MM) | $49,035 | $51,123 | $54,985 | $55,625 | $60,448 | $67,061 |
| Net Debt / EBITDA | 5.45 | 5.82 | 5.6 | 5.67 | 5.81 | 6.09 |
Duke Energy has strong margins with a stable trend, wider gross margins than its peer group, and positive EPS growth. However, the firm suffers from a deteriorating pattern of cash flows and a highly leveraged balance sheet. Finally, we note that Duke Energy has weak revenue growth and a flat capital expenditure trend.
