NextEra Energy shares fell by -2.4% during the day's morning session, and are now trading at a price of $77.35. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
a Very Low P/E Ratio but Trading Above Its Fair Price:
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 Technology sector, which has an average price to earnings (P/E) ratio of 30.01 and an average price to book (P/B) ratio of 3.91. In contrast, NextEra Energy has a trailing 12 month P/E ratio of 23.0 and a P/B ratio of 3.18.
NextEra Energy's PEG ratio is 2.84, 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.
Growing Revenues but Not Enough Current Assets to Cover Current Liabilities:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $16,727 | $19,204 | $17,997 | $17,069 | $20,956 | $28,114 |
| Operating Margins | 26% | 28% | 28% | 17% | 19% | 36% |
| Net Margins | 40% | 20% | 16% | 21% | 20% | 26% |
| Net Income (M) | $6,638 | $3,769 | $2,919 | $3,573 | $4,147 | $7,310 |
| Net Interest Expense (M) | $3,072 | -$1,517 | -$2,703 | $262 | -$249 | -$2,949 |
| Depreciation & Amort. (M) | $3,911 | $4,216 | $4,052 | $3,924 | $4,503 | $5,879 |
| Diluted Shares (M) | 1,908 | 1,942 | 1,969 | 1,972 | 1,979 | 2,031 |
| Earnings Per Share | $3.48 | $1.94 | $1.48 | $1.81 | $2.1 | $3.6 |
| EPS Growth | n/a | -44.25% | -23.71% | 22.3% | 16.02% | 71.43% |
| Avg. Price | $36.98 | $47.71 | $62.62 | $76.71 | $76.01 | $77.35 |
| P/E Ratio | 10.51 | 24.22 | 42.03 | 42.15 | 36.02 | 21.02 |
| Free Cash Flow (M) | $4,455 | $4,582 | $3,538 | $2,558 | $2,257 | $4,197 |
| CAPEX (M) | $2,138 | $3,573 | $4,445 | $4,995 | $6,005 | $7,104 |
| EV / EBITDA | 9.77 | 10.0 | 14.95 | 24.6 | 19.64 | 10.94 |
| Total Debt (M) | $11,025 | $5,070 | $15,676 | $18,510 | $21,002 | $25,274 |
| Net Debt / EBITDA | 1.27 | 0.47 | 1.59 | 2.61 | 2.26 | 1.4 |
| Current Ratio | 0.36 | 0.53 | 0.47 | 0.53 | 0.51 | 0.55 |
NextEra Energy has growing revenues and increasing reinvestment in the business and strong operating margins with a positive growth rate. Additionally, the company's financial statements display positive EPS growth and healthy leverage levels. However, the firm has not enough current assets to cover current liabilities because its current ratio is 0.55. Finally, we note that NextEra Energy has positive cash flows.
