It's been a great afternoon session for TC Energy investors, who saw their shares rise 2.6% to a price of $39.62 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.
TC Energy Has Attractive Multiples and Trades Below Its Graham Number:
TC Energy Corporation operates as an energy infrastructure company in North America. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 20.35 and an average price to book (P/B) ratio of 2.27. In contrast, TC Energy has a trailing 12 month P/E ratio of 20.6 and a P/B ratio of 1.49.
When we divide TC Energy's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -11.52. 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 Firm Has a Declining EPS Growth Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $13,679 | $13,255 | $12,999 | $13,387 | $14,977 | $15,934 |
| Operating Margins | 42% | 50% | 52% | 30% | 24% | 39% |
| Net Margins | 27% | 31% | 36% | 15% | 5% | 18% |
| Net Income (M) | $3,702 | $4,140 | $4,616 | $1,955 | $748 | $2,922 |
| Net Interest Expense (M) | -$1,815 | -$1,398 | -$1,666 | -$1,893 | -$2,258 | -$2,126 |
| Depreciation & Amort. (M) | $2,350 | $2,464 | $2,590 | $2,522 | $2,584 | $2,778 |
| Diluted Shares (M) | 903 | 931 | 940 | 974 | 996 | 1,030 |
| Earnings Per Share | $3.92 | $4.27 | $4.74 | $1.86 | $0.64 | $2.75 |
| EPS Growth | n/a | 8.93% | 11.01% | -60.76% | -65.59% | 329.69% |
| Avg. Price | $31.43 | $37.47 | $37.52 | $41.72 | $48.94 | $39.645 |
| P/E Ratio | 8.02 | 8.75 | 7.92 | 22.31 | 76.47 | 14.42 |
| Free Cash Flow (M) | -$2,863 | -$393 | -$1,842 | -$244 | -$2,586 | -$5,030 |
| CAPEX (M) | $9,418 | $7,475 | $8,900 | $7,134 | $8,961 | $12,298 |
| Current Ratio | 0.4 | 0.59 | 0.43 | 0.57 | 0.43 | 0.96 |
TC Energy has declining EPS growth, negative cash flows, and not enough current assets to cover current liabilities because its current ratio is 0.96. On the other hand, the company has growing revenues and increasing reinvestment in the business working in its favor. Furthermore, TC Energy has decent operating margins with a stable trend.
