Today we're going to take a closer look at large-cap Utilities company Dominion Energy, whose shares are currently trading at $45.62. 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!
Dominion Energy's Valuation Is in Line With Its Sector Averages:
Dominion Energy, Inc. produces and distributes energy 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, Dominion Energy has a trailing 12 month P/E ratio of 22.0 and a P/B ratio of 1.43.
When we divide Dominion Energy's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -3.42. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Company Has a Highly Leveraged Balance Sheet and a Declining EPS Growth Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $11,199 | $14,401 | $14,172 | $13,964 | $17,174 | $18,345 |
| Gross Margins | 27% | 11% | 15% | 22% | 9% | 17% |
| Operating Margins | 28.0% | 12.0% | 15.0% | 22.0% | 9.0% | 17.0% |
| Net Margins | 23.0% | 10.0% | 11.0% | 24.0% | 6.0% | 13.0% |
| Net Income (MM) | $2,549 | $1,376 | $1,583 | $3,314 | $994 | $2,333 |
| Net Interest Expense (MM) | $1,279 | $1,486 | $1,377 | $1,354 | $966 | $1,761 |
| Depreciation & Amort. (MM) | $1,660 | $2,283 | $2,332 | $2,478 | $2,830 | $2,863 |
| Earnings Per Share | $3.74 | $1.62 | -$0.57 | $3.98 | $1.09 | $2.7 |
| Diluted Shares (MM) | 655 | 809 | 831 | 808 | 825 | 846 |
| Free Cash Flow (MM) | $519 | $224 | $247 | $2,575 | $3,700 | $5,533 |
| Net Current Assets (MM) | -$50,705 | -$63,694 | -$62,558 | -$63,403 | -$66,512 | -$69,659 |
| Long Term Debt (MM) | $31,144 | $28,998 | $33,957 | $37,426 | $38,914 | $39,223 |
| Net Debt / EBITDA | 6.8 | 7.57 | 8.41 | 6.8 | 10.3 | 8.05 |
Dominion Energy has slimmer gross margins than its peers, declining EPS growth, and a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and no capital expenditures and a pattern of improving cash flows. Furthermore, Dominion Energy has average net margins with a negative growth trend.
