DBA Sempra (SRE) stock climbed 0.4 % this afternoon. According to our metrics, the company seems fairly valued at today's prices. In the below analysis, we will put DBA Sempra's valuation in the context of its strong growth indicators and mixed market sentiment, which are also strong drivers for share price.
Sempra operates as an energy infrastructure company in the United States and internationally. The large-cap Utilities company is based in San Diego, United States and has 15,785 full time employees.
SRE's P/E Ratio Is Comparable to its Sector Average
Compared to the Utilities sector's average of 22.89, DBA Sempra has a trailing twelve month price to earnings (P/E) ratio of 17.2 and an expected P/E ratio of 14.2. P/E ratios are calculated by dividing the company's share price by either its trailing 12 month ($3.95) or forward earnings per share ($4.79).
Earnings is another term for the net profits left over after subtracting cost of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since DBA Sempra's P/E ratio is near its sector average of 22.89, we can deduce that the market is fairly valuing the company's earnings.
DBA Sempra Is Overvalued in Terms of Expected Growth
DBA Sempra's PEG ratio is 3.64. This metric represents the company's earnings per share divided by its expected growth ratio, and is a useful complement to the price to earnings analysis, because it factors in growth to the valuation. A PEG ratio around or below 1 implies that the market in fairly valuing the company in terms of its growth estimates. But when the PEG ratio is higher, as in DBA Sempra's case, it tells us the company is overvalued.
SRE Has an Average P/B Ratio
Traditionally, stock pickers used to focus primarily on finding issues that were trading significantly below their tangible asset value, to guarantee themselves a margin of safety. But such an approach would screen out many valuable securities because many profitable businesses -- especially those that heavily leverage information technology -- simply do not have many tangible assets compared to more capital intensive companies.
Therefore, modern value investors tend to focus less on absolute price to book value (P/B) ratios. Instead of singling out stocks with a P/B ratio of less than 1, they will compare the target company against its peer group. For DBA Sempra, the P/B value is 1.59 while the average for the Utilities sector is 1.03.
SRE's Weak Cash Flow Generation Is Troubling
The table below shows that DBA Sempra is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in DBA Sempra's case, free cash flow is growing at an average rate of 0.0% with a coefficient of variability of 130698969158.5%. We can also see that cash flows from operations are evolving at a 0.0% rate, versus 0.0%:
|Date Reported||Cash Flow from Operations ($ k)||Capital expenditures ($ k)||Free Cash Flow ($ k)||YoY Growth (%)|
DBA Sempra's Margins Are Strong
If you buy a stock for the long run, you want the underlying business model to be profitable. Gross margins tell you how much profit the company generates compared to the cost of revenue, which is the cost directly related to providing DBA Sempra's goods and services. Operating margins, on the other hand, tell you how much of these profits the company keeps after you take overhead into account.
DBA Sempra's Gross Margins
|Date Reported||Revenue ($ k)||Cost of Revenue ($ k)||Gross Margins (%)||YoY Growth (%)|
DBA Sempra's Operating Margins
|Date Reported||Total Revenue ($ k)||Operating Expenses ($ k)||Operating Margins (%)||YoY Growth (%)|
DBA Sempra's cost of revenue is growing at a rate of -0.0% in contrast to -8.7% for operating expenses. Sales revenues, on the other hand, have experienced a 0.0% growth rate. As a result, the average gross margins growth is -0.0 and the average operating margins growth rate is -2.8, with coefficients of variability of 6.5% and 11.9% respectively.
DBA Sempra Benefits From Positive Market Signals
The market sentiment regarding DBA Sempra is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $95.0 to $78.0. SRE is trading -18.91% away from its target price of $83.89. 0.8% of the company's shares are tied to short positions, and 88.1% of the shares are held by institutional investors.
|2023-06-30||Vanguard Group Inc||20%||61,566,332||$4,188,357,490|
|2023-06-30||Capital International Investors||17%||54,919,478||$3,736,172,021|
|2023-06-30||State Street Corporation||11%||35,005,792||$2,381,443,987|
|2023-06-30||Wellington Management Group, LLP||8%||24,043,326||$1,635,667,438|
|2023-06-30||Newport Trust Company, LLC||4%||14,135,562||$961,642,265|
|2022-12-31||Norges Bank Investment Management||4%||12,945,404||$880,675,818|
|2023-06-30||ClearBridge Investments, LLC||4%||11,631,454||$791,287,801|
|2023-06-30||Geode Capital Management, LLC||4%||11,501,862||$782,471,657|