A strong performer from today's afternoon trading session is Williams, whose shares rose 1.7% to $44.0 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
a Very Low P/E Ratio but Trading Above Its Fair Price:
The Williams Companies, Inc., together with its subsidiaries, operates as an energy infrastructure company primarily in the United States. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 20.3 and an average price to book (P/B) ratio of 2.25. In contrast, Williams has a trailing 12 month P/E ratio of 18.0 and a P/B ratio of 4.32.
Williams's PEG ratio is 12.13, 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.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $8,686 | $8,201 | $7,719 | $10,627 | $10,965 | $10,907 |
| Operating Margins | 9% | 23% | 28% | 25% | 28% | 40% |
| Net Margins | -2% | 10% | 3% | 14% | 19% | 28% |
| Net Income (M) | -$155 | $850 | $211 | $1,517 | $2,049 | $3,179 |
| Net Interest Expense (M) | $1,112 | $1,186 | $1,172 | $1,179 | $1,147 | $1,236 |
| Depreciation & Amort. (M) | $1,725 | $1,714 | $1,721 | $1,842 | $2,009 | $2,071 |
| Diluted Shares (M) | 974 | 1,214 | 1,215 | 1,218 | 1,223 | 1,223 |
| Earnings Per Share | -$0.16 | $0.7 | $0.17 | $1.24 | $1.67 | $2.6 |
| EPS Growth | n/a | 537.5% | -75.71% | 629.41% | 34.68% | 55.69% |
| Avg. Price | $19.86 | $19.6 | $16.26 | $22.57 | $30.27 | $44.0 |
| P/E Ratio | -124.12 | 28.0 | 95.65 | 18.06 | 18.02 | 16.86 |
| Free Cash Flow (M) | $37 | $1,584 | $2,257 | $2,706 | $2,636 | $3,422 |
| CAPEX (M) | $3,256 | $2,109 | $1,239 | $1,239 | $2,253 | $2,516 |
| EV / EBITDA | 15.5 | 11.99 | 10.46 | 10.59 | 11.65 | 11.74 |
| Total Debt (M) | $22,367 | $20,148 | $21,451 | $21,650 | $21,927 | $23,376 |
| Net Debt / EBITDA | 8.9 | 5.46 | 5.43 | 4.46 | 4.33 | 3.34 |
| Current Ratio | 0.81 | 0.4 | 0.62 | 0.91 | 0.78 | 0.77 |
Williams has strong operating margins with a positive growth rate and exceptional EPS growth. Additionally, the company's financial statements display generally positive cash flows and growing revenues and a flat capital expenditure trend. However, the firm suffers from not enough current assets to cover current liabilities because its current ratio is 0.77 and a highly leveraged balance sheet.
