It's been a great evening session for NextEra Energy investors, who saw their shares rise 1.1% to a price of $59.17 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
A Very Low P/E Ratio but Trades Above Its Graham Number:
NextEra Energy, Inc., through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 17.53 and an average price to book (P/B) ratio of 1.71. In contrast, NextEra Energy has a trailing 12 month P/E ratio of 15.6 and a P/B ratio of 2.58.
NextEra Energy's PEG ratio is 2.29, 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.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $16,727 | $19,204 | $17,997 | $17,069 | $20,956 | $27,401 |
| Gross Margins | 25% | 26% | 26% | 17% | 17% | 34% |
| Operating Margins | 44% | 28% | 28% | 19% | 19% | 35% |
| Net Margins | 40% | 20% | 16% | 21% | 20% | 28% |
| Net Income (MM) | $6,638 | $3,769 | $2,919 | $3,573 | $4,147 | $7,622 |
| Net Interest Expense (MM) | $3,072 | $121 | $92 | $262 | $200 | $327 |
| Depreciation & Amort. (MM) | $3,911 | $4,216 | $4,052 | $3,924 | $4,503 | $5,443 |
| Earnings Per Share | $3.48 | $1.94 | $1.48 | $1.81 | $2.1 | $3.59 |
| Diluted Shares (MM) | 1,908 | 1,942 | 1,969 | 1,972 | 1,979 | 2,122 |
| Free Cash Flow (MM) | $6,593 | $8,155 | $7,983 | $7,553 | $8,262 | $9,418 |
| Net Current Assets (MM) | -$32,646 | -$68,436 | -$75,373 | -$85,955 | -$96,009 | -$100,862 |
| Long Term Debt (MM) | $26,782 | $37,543 | $41,944 | $50,960 | $55,256 | $59,183 |
| Net Debt / EBITDA | 3.29 | 4.39 | 5.12 | 7.18 | 7.38 | 4.76 |
NextEra Energy has growing revenues and no capital expenditures and decent operating margins with a stable trend. Additionally, the company's financial statements display positive EPS growth and generally positive cash flows. However, the firm suffers from slimmer gross margins than its peers and a highly leveraged balance sheet.
