It's been a great evening session for Cheniere Energy investors, who saw their shares rise 2.3% to a price of $169.78 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 Decline in Expected Earnings Clouds Its Value Outlook but Trading Above Its Fair Price:
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 20.35 and an average price to book (P/B) ratio of 2.27. In contrast, Cheniere Energy has a trailing 12 month P/E ratio of 8.2 and a P/B ratio of 9.19.
When we divide Cheniere Energy's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.68. 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.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $7,987 | $9,730 | $9,358 | $15,864 | $33,428 | $20,394 |
| Operating Margins | 25% | 24% | 28% | -4% | 14% | 76% |
| Net Margins | 6% | 7% | -1% | -15% | 4% | 48% |
| Net Income (M) | $471 | $648 | -$85 | -$2,343 | $1,428 | $9,881 |
| Net Interest Expense (M) | $875 | $1,432 | $1,525 | $1,438 | $1,406 | $1,141 |
| Depreciation & Amort. (M) | $449 | $794 | $932 | $1,006 | $1,113 | $1,190 |
| Diluted Shares (M) | 248 | 258 | 252 | 253 | 253 | 243 |
| Earnings Per Share | $1.9 | $2.51 | -$0.34 | -$9.25 | $5.64 | $40.72 |
| EPS Growth | n/a | 32.11% | -113.55% | -2620.59% | 160.97% | 621.99% |
| Avg. Price | $59.6 | $63.19 | $48.92 | $84.11 | $127.37 | $169.63 |
| P/E Ratio | 31.04 | 24.98 | -143.88 | -9.09 | 22.38 | 4.14 |
| Free Cash Flow (M) | -$1,653 | -$1,223 | -$574 | $1,503 | $8,693 | $6,297 |
| CAPEX (M) | $3,643 | $3,056 | $1,839 | $966 | $1,830 | $2,121 |
| EV / EBITDA | 16.82 | 14.13 | 11.69 | 163.07 | 9.86 | 3.66 |
| Total Debt (M) | $28,418 | $30,774 | $30,843 | $29,815 | $24,868 | $23,697 |
| Net Debt / EBITDA | 11.09 | 8.97 | 8.2 | 93.15 | 4.15 | 1.18 |
| Current Ratio | 2.43 | 2.25 | 1.44 | 1.08 | 0.83 | 1.63 |
Cheniere Energy benefits from strong operating margins with a positive growth rate, exceptional EPS growth, and generally positive cash flows. The company's financial statements show rapidly growing revenues and decreasing reinvestment in the business and a decent current ratio of 1.63. However, the firm has a highly leveraged balance sheet.
