It hasn't been a great evening session for PG&E investors, who have watched their shares sink by -2.6% to a price of $17.78. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
The Market May Be Undervaluing PG&E's Assets and Equity:
PG&E Corporation, through its subsidiary, Pacific Gas and Electric Company, engages in the sale and delivery of electricity and natural gas to customers in northern and central California, the United States. 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, PG&E has a trailing 12 month P/E ratio of 15.9 and a P/B ratio of 1.48.
PG&E's PEG ratio is 1.36, 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.
Negative Cash Flows:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $16,759 | $17,129 | $18,469 | $20,642 | $21,680 | $24,428 |
| Operating Margins | -57% | -59% | 10% | 9% | 8% | 11% |
| Net Margins | -41% | -45% | -7% | 0% | 8% | 9% |
| Net Income (M) | -$6,837 | -$7,642 | -$1,304 | -$88 | $1,814 | $2,256 |
| Net Interest Expense (M) | $929 | $934 | $1,260 | $1,601 | $1,917 | $2,850 |
| Depreciation & Amort. (M) | $3,036 | $3,234 | $3,468 | $3,403 | $3,856 | $3,738 |
| Diluted Shares (M) | 517 | 528 | 126 | 1,985 | 2,132 | 2,138 |
| Earnings Per Share | -$13.25 | -$14.5 | -$1.05 | -$0.05 | $0.84 | $1.05 |
| EPS Growth | n/a | -9.43% | 92.76% | 95.24% | 1780.0% | 25.0% |
| Avg. Price | $41.52 | $14.97 | $11.17 | $10.87 | $11.73 | $17.78 |
| P/E Ratio | -3.13 | -1.03 | -10.64 | -217.4 | 12.89 | 16.31 |
| Free Cash Flow (M) | -$1,762 | -$1,497 | -$26,820 | -$5,427 | -$5,863 | -$4,967 |
| CAPEX (M) | $6,514 | $6,313 | $7,690 | $7,689 | $9,584 | $9,714 |
| EV / EBITDA | -10.07 | -1.72 | 8.29 | 12.65 | 14.28 | 14.0 |
| Total Debt (M) | $36,418 | $1,500 | $34,920 | $42,706 | $50,010 | $52,351 |
| Net Debt / EBITDA | -5.21 | 0.01 | 6.59 | 8.02 | 8.66 | 8.07 |
| Current Ratio | 0.22 | 1.33 | 0.71 | 0.64 | 0.81 | 0.83 |
PG&E has negative cash flows, not enough current assets to cover current liabilities because its current ratio is 0.83, and a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and increasing reinvestment in the business and positive EPS growth. Furthermore, PG&E has weak operating margins with a stable trend.
