We've been asking ourselves recently if the market has placed a fair valuation on DBA Sempra. 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.
DBA Sempra's Valuation Is in Line With Its Sector Averages:
Sempra operates as an energy infrastructure company in the United States and internationally. 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, DBA Sempra has a trailing 12 month P/E ratio of 17.9 and a P/B ratio of 1.65.
DBA Sempra's PEG ratio is 3.79, 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:
| 2018-02-27 | 2019-02-26 | 2020-02-27 | 2021-02-25 | 2022-02-25 | 2023-02-28 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $11,207 | $10,102 | $10,829 | $11,370 | $12,857 | $14,439 |
| Gross Margins | 66.0% | 71.0% | 75.0% | 79.0% | 75.0% | 69.0% |
| Operating Margins | 21% | 20% | 24% | 25% | 22% | 18% |
| Net Margins | 2.0% | 10.0% | 20.0% | 35.0% | 10.0% | 15.0% |
| Net Income (MM) | $257 | $1,050 | $2,198 | $3,933 | $1,318 | $2,139 |
| Net Interest Expense (MM) | -$613 | -$801 | -$990 | -$985 | -$1,129 | -$979 |
| Depreciation & Amort. (MM) | -$1,490 | -$1,491 | -$1,569 | -$1,666 | -$1,855 | -$2,019 |
| Earnings Per Share | $1.01 | $3.42 | $7.29 | $12.88 | $3.93 | $6.55 |
| EPS Growth | n/a | 238.61% | 113.16% | 76.68% | -69.49% | 66.67% |
| Diluted Shares (MM) | 252 | 270 | 282 | 292 | 319 | 320 |
| Free Cash Flow (MM) | $7,557 | $5,480 | $5,897 | $7,919 | $9,490 | $6,875 |
| Capital Expenditures (MM) | -$3,932 | -$1,964 | -$2,809 | -$5,328 | -$5,648 | -$5,733 |
| Net Current Assets (MM) | -$31,803 | -$37,745 | -$40,518 | -$38,064 | -$39,611 | -$43,354 |
| Long Term Debt (MM) | $16,445 | $22,547 | $20,785 | $21,781 | $21,068 | $24,548 |
| Net Debt / EBITDA | 5.01 | 6.88 | 6.13 | 5.17 | 5.12 | 6.24 |
DBA Sempra has strong margins with a stable trend, exceptional EPS growth, and wider gross margins than its peer group. However, the firm has a highly leveraged balance sheet. Finally, we note that DBA Sempra has weak revenue growth and a flat capital expenditure trend and irregular cash flows.
