LNG Stock -- What's In It For Investors?

Today we're going to take a closer look at large-cap Utilities company Cheniere Energy, whose shares are currently trading at $179.41. 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!

A Very Low P/E Ratio but Trades Above Its Graham Number:

Cheniere Energy, Inc., an energy infrastructure company, primarily engages in the liquefied natural gas (LNG) related businesses 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, Cheniere Energy has a trailing 12 month P/E ratio of 3.6 and a P/B ratio of 10.34.

When we divideCheniere Energy's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.22, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.

The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:

2018 2019 2020 2021 2022 2023
Revenue (MM) $7,987 $9,730 $9,358 $15,864 $33,428 $29,349
Gross Margins 25% 24% 28% -4% 14% 48%
Operating Margins 25% 24% 28% -4% 14% 48%
Net Margins 15% 13% 6% 5% 8% 36%
Net Income (MM) $1,200 $1,232 $586 $778 $2,635 $10,645
Net Interest Expense (MM) $875 $1,432 $1,525 $1,438 $1,406 $1,288
Depreciation & Amort. (MM) $449 $794 $932 $1,011 $1,119 $1,166
Earnings Per Share $1.9 $2.51 -$0.34 -$9.25 $5.64 $33.86
Diluted Shares (MM) 248 258 252 253 253 233
Free Cash Flow (MM) -$1,653 -$1,223 -$574 $1,503 $8,693 $8,500
Capital Expenditures (MM) $3,643 $3,056 $1,839 $966 $1,830 $1,851
Net Current Assets (MM) $2,386 $217 -$1,123 -$6,915 -$14,256 -$6,175
Long Term Debt (MM) $28,236 $30,774 $30,471 $29,449 $24,055 $23,380
Net Debt / EBITDA 10.24 8.81 8.01 90.32 3.94 1.32

Cheniere Energy has exceptional EPS growth and growing revenues and decreasing reinvestment in the business. Additionally, the company's financial statements display decent operating margins with a positive growth rate and generally positive cash flows. However, the firm suffers from slimmer gross margins than its peers and a highly leveraged balance sheet.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.