We've been asking ourselves recently if the market has placed a fair valuation on NextEra 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.
NextEra Energy's Valuation Is in Line With Its Sector Averages:
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 16.2 and a P/B ratio of 2.68.
NextEra Energy's PEG ratio is 2.39, 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 |
| Revenue Growth | n/a | 14.81% | -6.29% | -5.16% | 22.77% | 30.75% |
| 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 |
| EPS Growth | n/a | -44.25% | -23.71% | 22.3% | 16.02% | 70.95% |
| 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 |
| Current Ratio | 0.36 | 0.53 | 0.47 | 0.53 | 0.51 | 0.5 |
| Total Debt (MM) | $37,712 | $42,583 | $48,091 | $51,580 | $64,966 | $73,322 |
| Net Debt / EBITDA | 3.29 | 4.39 | 5.12 | 7.18 | 7.38 | 4.76 |
NextEra Energy has growing revenues and no capital expenditures, decent operating margins with a stable trend, and positive EPS growth. However, the firm suffers from irregular cash flows and a highly leveraged balance sheet.
