We've been asking ourselves recently if the market has placed a fair valuation on WEC Energy. 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.
WEC Energy's Valuation Is in Line With Its Sector Averages:
WEC Energy Group, Inc., through its subsidiaries, provides regulated natural gas and electricity, and renewable and nonregulated renewable energy services 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, WEC Energy has a trailing 12 month P/E ratio of 19.4 and a P/B ratio of 2.23.
WEC Energy's PEG ratio is 3.14, 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.
Wider Gross Margins Than the Industry Average of 35.4%:
| 2018-02-28 | 2019-02-26 | 2020-02-27 | 2021-02-25 | 2022-02-24 | 2023-02-23 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $7,648 | $7,680 | $7,523 | $7,242 | $8,316 | $9,597 |
| Gross Margins | 63.0% | 62.0% | 64.0% | 68.0% | 60.0% | 55.0% |
| Operating Margins | 23% | 19% | 20% | 24% | 21% | 20% |
| Net Margins | 16.0% | 14.0% | 15.0% | 17.0% | 16.0% | 15.0% |
| Net Income (MM) | $1,205 | $1,060 | $1,135 | $1,201 | $1,302 | $1,409 |
| Net Interest Expense (MM) | -$416 | -$445 | -$502 | -$494 | -$471 | -$515 |
| Depreciation & Amort. (MM) | -$799 | -$846 | -$926 | -$976 | -$1,074 | -$1,123 |
| Earnings Per Share | $3.79 | $3.34 | $3.58 | $3.79 | $4.11 | $4.45 |
| EPS Growth | n/a | -11.87% | 7.19% | 5.87% | 8.44% | 8.27% |
| Diluted Shares (MM) | 317 | 317 | 317 | 316 | 316 | 316 |
| Free Cash Flow (MM) | $4,014 | $4,549 | $4,569 | $4,414 | $4,264 | $4,326 |
| Capital Expenditures (MM) | -$1,936 | -$2,104 | -$2,223 | -$2,218 | -$2,231 | -$2,265 |
| Net Current Assets (MM) | -$19,885 | -$21,386 | -$22,604 | -$27,893 | n/a | n/a |
WEC Energy has strong margins with a stable trend, wider gross margins than its peer group, and positive EPS growth. Furthermore, WEC Energy has weak revenue growth and a flat capital expenditure trend and irregular cash flows.
