CenterPoint Energy Inc Valuation – January 2019 $CNP

Company Profile (excerpt from Reuters): CenterPoint Energy, Inc., incorporated on August 31, 2001, is a public utility holding company. The Company’s operating subsidiaries own and operate electric transmission and distribution facilities, and natural gas distribution facilities, and own interests in Enable Midstream Partners, LP (Enable). The Company’s segments include Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Its Electric Transmission & Distribution segment provides electric transmission and distribution services to retail electric providers (REPs). Its Natural Gas Distribution segment offers intrastate natural gas sales to and natural gas transportation and distribution for residential, commercial and industrial customers. Its Energy Services segment includes non-rate regulated gas sales to, and transportation and storage services for, commercial and industrial customers. Its Midstream Investments segment includes equity investment in Enable that owns, operates and develops natural gas and crude oil assets. Its Other Operations segment includes office buildings and other real estate used in its business operations and other corporate operations, which support all of its business operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNP – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,689,922,597 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.06 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 13.14% Fail
6. Moderate PEmg Ratio PEmg < 20 20.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.06 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 50.01 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.45
MG Growth Estimate 1.09%
MG Value $15.49
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $21.04
MG Value based on 0% Growth $12.34
Market Implied Growth Rate 5.85%
Current Price $29.31
% of Intrinsic Value 189.23%

CenterPoint Energy, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.35 in 2014 to an estimated $1.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into CenterPoint Energy, Inc. revealed the company was trading above its Graham Number of $14.08. The company pays a dividend of $1.07 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.2, which was below the industry average of 21.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-32.17.

CenterPoint Energy, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$32.17
Graham Number $14.08
PEmg 20.20
Current Ratio 1.06
PB Ratio 2.31
Current Dividend $1.07
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 12

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,726,000,000
Total Current Liabilities $2,581,000,000
Long-Term Debt $7,252,000,000
Total Assets $22,228,000,000
Intangible Assets $934,000,000
Total Liabilities $16,720,000,000
Shares Outstanding (Diluted Average) 435,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.81
Dec2017 $4.13
Dec2016 $1.00
Dec2015 -$1.61
Dec2014 $1.42
Dec2013 $0.72
Dec2012 $0.97
Dec2011 $3.17
Dec2010 $1.07
Dec2009 $1.01
Dec2008 $1.30
Dec2007 $1.17
Dec2006 $1.33
Dec2005 $0.75
Dec2004 -$2.94
Dec2003 $1.46
Dec2002 -$13.16
Dec2001 $3.35
Dec2000 $1.56
Dec1999 $5.18
Dec1998 -$0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.45
Dec2017 $1.56
Dec2016 $0.35
Dec2015 $0.33
Dec2014 $1.35
Dec2013 $1.34
Dec2012 $1.60
Dec2011 $1.80
Dec2010 $1.13
Dec2009 $1.14
Dec2008 $0.92
Dec2007 $0.60
Dec2006 -$0.63
Dec2005 -$1.77
Dec2004 -$2.67
Dec2003 -$1.80
Dec2002 -$2.52

Recommended Reading:

Other ModernGraham posts about the company

CenterPoint Energy Inc Valuation – March 2018 $CNP
CenterPoint Energy Inc Valuation – June 2016 $CNP
18 Companies in the Spotlight This Week – 3/15/15
CenterPoint Energy Inc. Annual Valuation – 2015 $CNP
26 Companies in the Spotlight This Week – 11/22/14

Other ModernGraham posts about related companies

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Xcel Energy Inc Valuation – December 2018 $XEL
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Capital Power Corp Valuation – August 2018 $TSE-CPX
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South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

CenterPoint Energy Inc Valuation – March 2018 $CNP

Company Profile (excerpt from Reuters): CenterPoint Energy, Inc., incorporated on August 31, 2001, is a public utility holding company. The Company’s operating subsidiaries own and operate electric transmission and distribution facilities, and natural gas distribution facilities, and own interests in Enable Midstream Partners, LP (Enable). The Company’s segments include Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Its Electric Transmission & Distribution segment provides electric transmission and distribution services to retail electric providers (REPs). Its Natural Gas Distribution segment offers intrastate natural gas sales to and natural gas transportation and distribution for residential, commercial and industrial customers. Its Energy Services segment includes non-rate regulated gas sales to, and transportation and storage services for, commercial and industrial customers. Its Midstream Investments segment includes equity investment in Enable that owns, operates and develops natural gas and crude oil assets. Its Other Operations segment includes office buildings and other real estate used in its business operations and other corporate operations, which support all of its business operations.

CNP Chart

CNP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNP – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,702,959,823 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 25.71% Fail
6. Moderate PEmg Ratio PEmg < 20 16.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.51 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 25.14 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.67
MG Growth Estimate 3.52%
MG Value $25.99
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $24.23
MG Value based on 0% Growth $14.21
Market Implied Growth Rate 3.87%
Current Price $27.15
% of Intrinsic Value 104.47%

CenterPoint Energy, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.35 in 2014 to an estimated $1.67 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 3.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into CenterPoint Energy, Inc. revealed the company was trading above its Graham Number of $18.97. The company pays a dividend of $1.07 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.24, which was below the industry average of 24.93, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-33.76.

CenterPoint Energy, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.76
Graham Number $18.97
PEmg 16.24
Current Ratio 1.11
PB Ratio 2.51
Current Dividend $1.07
Dividend Yield 3.94%
Number of Consecutive Years of Dividend Growth 12

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $3,395,000,000
Total Current Liabilities $3,069,000,000
Long-Term Debt $8,195,000,000
Total Assets $22,736,000,000
Intangible Assets $867,000,000
Total Liabilities $18,048,000,000
Shares Outstanding (Diluted Average) 434,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.47
Dec2017 $4.13
Dec2016 $1.00
Dec2015 -$1.61
Dec2014 $1.42
Dec2013 $0.72
Dec2012 $0.97
Dec2011 $3.17
Dec2010 $1.07
Dec2009 $1.01
Dec2008 $1.30
Dec2007 $1.17
Dec2006 $1.33
Dec2005 $0.75
Dec2004 -$2.94
Dec2003 $1.46
Dec2002 -$13.16
Dec2001 $3.35
Dec2000 $1.56
Dec1999 $5.18
Dec1998 -$0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.67
Dec2017 $1.56
Dec2016 $0.35
Dec2015 $0.33
Dec2014 $1.35
Dec2013 $1.34
Dec2012 $1.60
Dec2011 $1.80
Dec2010 $1.13
Dec2009 $1.14
Dec2008 $0.92
Dec2007 $0.60
Dec2006 -$0.63
Dec2005 -$1.77
Dec2004 -$2.67
Dec2003 -$1.80
Dec2002 -$2.52

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/15/15
CenterPoint Energy Inc. Annual Valuation – 2015 $CNP
26 Companies in the Spotlight This Week – 11/22/14
CenterPoint Energy Inc. Annual Valuation – 2014 $CNP

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Public Service Enterprise Group Inc Valuation – July 2017 $PEG
Eversource Energy Valuation – July 2017 $ES
PPL Corp Valuation – June 2017 $PPL
Entergy Corp Valuation – April 2017 $ETR
California Water Service Group Valuation – Initial Coverage $CWT
TransAlta Corporation – Initial Coverage $TSE:TA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

CenterPoint Energy Inc Valuation – June 2016 $CNP

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how CenterPoint Energy Inc (CNP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CenterPoint Energy, Inc. is a public utility holding company. The Company’s segments include Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Its Electric Transmission & Distribution segment provides electric transmission and distribution services to retail electric providers. Its Natural Gas Distribution segment offers intrastate natural gas sales to and natural gas transportation and distribution for residential, commercial and industrial customers. Its Energy Services segment includes non-rate regulated gas sales to, and transportation and storage services for, commercial and industrial customers. Its Midstream Investments segment includes equity investment in Enable Midstream Partners, LP (Enable) that owns, operates and develops natural gas and crude oil assets. Its Other Operations segment includes office buildings and other real estate used in its business operations and other corporate operations.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CNP – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,097,147,591 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -75.86% Fail
6. Moderate PEmg Ratio PEmg < 20 65.86 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -36.95 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

CNP value chart June 2016

EPSmg $0.36
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $5.20
MG Value based on 0% Growth $3.05
Market Implied Growth Rate 28.68%
Current Price $23.62
% of Intrinsic Value N/A

CenterPoint Energy, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.6 in 2012 to an estimated $0.36 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.68% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

CenterPoint Energy, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

CNP charts June 2016

Net Current Asset Value (NCAV) -$35.02
Graham Number $13.74
PEmg 65.86
Current Ratio 0.92
PB Ratio 2.92
Current Dividend $1.00
Dividend Yield 4.24%
Number of Consecutive Years of Dividend Growth 11

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,335,000,000
Total Current Liabilities $2,534,000,000
Long-Term Debt $7,354,000,000
Total Assets $21,004,000,000
Intangible Assets $840,000,000
Total Liabilities $17,498,000,000
Shares Outstanding (Diluted Average) 433,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.03
Dec2015 -$1.61
Dec2014 $1.42
Dec2013 $0.72
Dec2012 $0.97
Dec2011 $3.17
Dec2010 $1.07
Dec2009 $1.01
Dec2008 $1.30
Dec2007 $1.17
Dec2006 $1.33
Dec2005 $0.75
Dec2004 -$2.94
Dec2003 $1.58
Dec2002 -$13.16
Dec2001 $3.35
Dec2000 $1.56
Dec1999 $5.18
Dec1998 -$0.50
Dec1997 $1.66
Dec1996 $1.66

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.36
Dec2015 $0.33
Dec2014 $1.35
Dec2013 $1.34
Dec2012 $1.60
Dec2011 $1.80
Dec2010 $1.13
Dec2009 $1.14
Dec2008 $0.92
Dec2007 $0.61
Dec2006 -$0.61
Dec2005 -$1.75
Dec2004 -$2.64
Dec2003 -$1.76
Dec2002 -$2.52
Dec2001 $2.61
Dec2000 $2.13

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/15/15
CenterPoint Energy Inc. Annual Valuation – 2015 $CNP
26 Companies in the Spotlight This Week – 11/22/14
CenterPoint Energy Inc. Annual Valuation – 2014 $CNP

Other ModernGraham posts about related companies

Southern Company Valuation – June 2016 $SO
CMS Energy Corp Valuation – June 2016 $CMS
Xcel Energy Inc Valuation – May 2016 $XEL
PPL Corporation Valuation – January 2016 Update $PPL
Entergy Corp Valuation – January 2016 Update $ETR
PPL Corporation Valuation – January 2016 Update $PPL
Entergy Corp Valuation – January 2016 Update $ETR
Pinnacle West Capital Corp Valuation – December 2015 Update $PNW
Pinnacle West Capital Corp Valuation – December 2015 Update $PNW
Pepco Holdings Inc Valuation – December 2015 Update $POM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

CenterPoint Energy Inc. Annual Valuation – 2015 $CNP

CenterPoint Energy logo CNPBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how CenterPoint Energy Inc. (CNP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Waters Corporation is an analytical instrument manufacturer that primarily designs, manufactures, sells and services, through its Waters Division, high performance liquid chromatography (HPLC), ultra performance liquid chromatography (UPLC and together with HPLC, referred to as LC) and mass spectrometry (MS) technology systems and support products, including chromatography columns, other consumable products and post-warranty service plans. The Company operates in two segments: Waters Division and TA Division. Through its TA Division (TA), the Company primarily designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments. The Company’s products are used by pharmaceutical, life science, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $20.54
MG Value $19.50
MG Opinion Fairly Valued
Value Based on 3% Growth $19.62
Value Based on 0% Growth $11.50
Market Implied Growth Rate 3.34%
Net Current Asset Value (NCAV) -$35.37
PEmg 15.18
Current Ratio 0.94
PB Ratio 1.96

Balance Sheet – December 2014

Current Assets $3,268,000,000
Current Liabilities $3,475,000,000
Total Debt $8,009,000,000
Total Assets $23,200,000,000
Intangible Assets $840,000,000
Total Liabilities $18,652,000,000
Outstanding Shares 435,000,000

Earnings Per Share

2014 $1.42
2013 $0.72
2012 $0.97
2011 $3.17
2010 $1.07
2009 $1.01
2008 $1.30
2007 $1.17
2006 $1.33
2005 $0.75
2004 -$2.94

Earnings Per Share – ModernGraham

2014 $1.35
2013 $1.34
2012 $1.60
2011 $1.80
2010 $1.13
2009 $1.14

Dividend History

Conclusion:

CenterPoint Energy Inc. does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio along with the insufficient earnings growth over the last ten years, while the Enterprising Investor takes issue with the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.13 in 2010 to $1.35 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 3.34% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of CenterPoint Energy Inc. (CNP) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on CenterPoint Energy Inc. (CNP)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in CenterPoint Energy Inc. (CNP) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

CenterPoint Energy Inc. Annual Valuation – 2014 $CNP

CenterPoint Energy logo CNPBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – November 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how CenterPoint Energy Inc. (CNP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CenterPoint Energy, Inc. is a domestic energy delivery company. The Company’s business segments include Electric Transmission and Distribution, Natural Gas Distribution, Competitive Natural Gas Sales and Services, Interstate Pipelines, Field Services and Other Operations. The Company serves metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. The company also owns a 58.3% interest in a midstream partnership it jointly controls with OGE Energy Corp. with operations in natural gas and liquids-rich producing areas of Oklahoma, Texas, Arkansas and Louisiana.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $24.12
MG Value $15.34
MG Opinion Overvalued
Value Based on 3% Growth $18.37
Value Based on 0% Growth $10.77
Market Implied Growth Rate 5.27%
Net Current Asset Value (NCAV) -$34.72
PEmg 19.04
Current Ratio 0.86
PB Ratio 2.33

Balance Sheet – September 2014

Current Assets $2,576,000,000
Current Liabilities $3,008,000,000
Total Debt $7,797,000,000
Total Assets $22,048,000,000
Intangible Assets $840,000,000
Total Liabilities $17,575,000,000
Outstanding Shares 432,000,000

Earnings Per Share

2014 (estimate) $1.16
2013 $0.72
2012 $0.97
2011 $3.17
2010 $1.07
2009 $1.01
2008 $1.30
2007 $1.17
2006 $1.33
2005 $0.75
2004 -$2.94

Earnings Per Share – ModernGraham

2014 (estimate) $1.27
2013 $1.34
2012 $1.60
2011 $1.80
2010 $1.13
2009 $1.14

Dividend History

Conclusion:

CenterPoint Energy Inc. does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio and the level of earnings growth over the last ten years, while the Enterprising Investor is concerned by the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.13 in 2010 to only an estimated $1.27 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.27% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on CenterPoint Energy Inc. (CNP)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in CenterPoint Energy Inc. (CNP) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

NextEra Energy Inc Valuation – February 2019 $NEE

Company Profile (excerpt from Reuters): NextEra Energy, Inc. (NEE), incorporated on September 10, 1984, is a holding company. The Company is an electric power companies in North America and, through its subsidiary NextEra Energy Resources, LLC (NEER) and its affiliated entities, is the generator of renewable energy from the wind and sun. NEE also owns and/or operates generation, transmission and distribution facilities to support its services to retail and wholesale customers, and has investments in gas infrastructure assets. Its segments include FPL and NEER. NEE also provides risk management services related to power and gas consumption related to its own generation assets and for a limited number of wholesale customers in selected markets. As of December 31, 2016, NEE’s business included approximately 45,900 megawatts (MW) of generating capacity with electric generation facilities located in 30 states in the United States, four provinces in Canada and in Spain; approximately 16% of the installed base of the United States wind power production capacity; approximately 11% of the installed base of the United States universal solar power production capacity; fleets of nuclear power stations in the United States, with eight reactors at five sites located in four states, representing approximately 6% of U.S. nuclear power electric generating capacity; more than 5.4 million retail and wholesale electric customer accounts, and approximately 14,700 people employed, primarily in the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NEE – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $89,957,748,174 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.36 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 141.32% Pass
6. Moderate PEmg Ratio PEmg < 20 18.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.40 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.97
MG Growth Estimate 13.09%
MG Value $345.61
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $144.50
MG Value based on 0% Growth $84.71
Market Implied Growth Rate 5.19%
Current Price $188.13
% of Intrinsic Value 54.43%

NextEra Energy Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.32 in 2015 to an estimated $9.97 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.19% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into NextEra Energy Inc revealed the company was trading above its Graham Number of $115.16. The company pays a dividend of $4.44 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.88, which was below the industry average of 22.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-124.47.

NextEra Energy Inc fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$124.47
Graham Number $115.16
PEmg 18.88
Current Ratio 0.36
PB Ratio 2.42
Current Dividend $4.44
Dividend Yield 2.36%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,393,000,000
Total Current Liabilities $17,563,000,000
Long-Term Debt $26,782,000,000
Total Assets $103,702,000,000
Intangible Assets $1,599,000,000
Total Liabilities $66,289,000,000
Shares Outstanding (Diluted Average) 481,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.25
Dec2018 $13.88
Dec2017 $11.39
Dec2016 $6.24
Dec2015 $6.06
Dec2014 $5.60
Dec2013 $4.47
Dec2012 $4.56
Dec2011 $4.59
Dec2010 $4.74
Dec2009 $3.97
Dec2008 $4.07
Dec2007 $3.27
Dec2006 $3.23
Dec2005 $2.34
Dec2004 $1.24
Dec2003 $1.27
Dec2002 $0.69
Dec2001 $1.16
Dec2000 $2.07
Dec1999 $2.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.97
Dec2018 $10.09
Dec2017 $7.72
Dec2016 $5.72
Dec2015 $5.32
Dec2014 $4.90
Dec2013 $4.52
Dec2012 $4.49
Dec2011 $4.35
Dec2010 $4.10
Dec2009 $3.65
Dec2008 $3.27
Dec2007 $2.67
Dec2006 $2.16
Dec2005 $1.53
Dec2004 $1.18
Dec2003 $1.25

Recommended Reading:

Other ModernGraham posts about the company

NextEra Energy Inc Valuation – May 2018 $NEE
NextEra Energy Inc Valuation – December 2016 $NEE
NextEra Energy Inc. Analysis – August 2015 Update $NEE
47 Companies in the Spotlight This Week – 5/16/15
NextEra Energy Inc. Quarterly Valuation – May 2015 $NEE

Other ModernGraham posts about related companies

Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Dominion Energy Inc Valuation – February 2019 $D

Company Profile (excerpt from Reuters): Dominion Energy, Inc., formerly Dominion Resources, Inc., incorporated on February 18, 1983, is a producer and transporter of energy. Dominion is focused on its investment in regulated electric generation, transmission and distribution and regulated natural gas transmission and distribution infrastructure. Dominion manages its operations through three primary segments: Dominion Virginia Power operating segment (DVP), Dominion Generation, Dominion Energy, and Corporate and Other. The DVP segment includes regulated electric distribution and regulated electric transmission. The Dominion Generation segment includes regulated electric fleet and merchant electric fleet. The Dominion Energy segment includes gas transmission and storage, gas distribution and storage, gas gathering and processing, liquefied natural gas (LNG) import and storage, and nonregulated retail energy marketing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of D – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,109,376,952 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.62 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 26.33% Fail
6. Moderate PEmg Ratio PEmg < 20 18.91 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.28 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.62 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.17 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.75
MG Growth Estimate 9.71%
MG Value $104.78
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $54.41
MG Value based on 0% Growth $31.90
Market Implied Growth Rate 5.21%
Current Price $70.97
% of Intrinsic Value 67.73%

Dominion Energy Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.28 in 2014 to an estimated $3.75 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Dominion Energy Inc revealed the company was trading above its Graham Number of $46.97. The company pays a dividend of $3.04 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.91, which was below the industry average of 22.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-80.86.

Dominion Energy Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$80.86
Graham Number $46.97
PEmg 18.91
Current Ratio 0.62
PB Ratio 2.28
Current Dividend $3.04
Dividend Yield 4.28%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,702,000,000
Total Current Liabilities $9,212,000,000
Long-Term Debt $32,188,000,000
Total Assets $79,082,000,000
Intangible Assets $6,410,000,000
Total Liabilities $58,656,000,000
Shares Outstanding (Diluted Average) 654,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.69
Dec2017 $4.72
Dec2016 $3.44
Dec2015 $3.20
Dec2014 $2.24
Dec2013 $2.93
Dec2012 $0.53
Dec2011 $2.45
Dec2010 $4.76
Dec2009 $2.17
Dec2008 $3.16
Dec2007 $3.88
Dec2006 $1.97
Dec2005 $1.50
Dec2004 $1.89
Dec2003 $0.50
Dec2002 $2.41
Dec2001 $1.08
Dec2000 $0.93
Dec1999 $0.74
Dec1998 $1.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.75
Dec2017 $3.62
Dec2016 $2.87
Dec2015 $2.48
Dec2014 $2.28
Dec2013 $2.39
Dec2012 $2.28
Dec2011 $3.20
Dec2010 $3.45
Dec2009 $2.70
Dec2008 $2.81
Dec2007 $2.40
Dec2006 $1.66
Dec2005 $1.50
Dec2004 $1.45
Dec2003 $1.20
Dec2002 $1.47

Recommended Reading:

Other ModernGraham posts about the company

Dominion Energy Inc Valuation – April 2018 $D
Dominion Resources Inc Valuation – July 2016 $D
5 Speculative and Overvalued Companies to Avoid – February 2015
27 Companies in the Spotlight This Week – 2/14/15
Dominion Resources Inc. Annual Valuation – 2015 $D

Other ModernGraham posts about related companies

Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Exelon Corp Valuation – January 2019 $EXC

Company Profile (excerpt from Reuters): Exelon Corporation, incorporated on February 4, 1999, is a utility services holding company. The Company, through its subsidiary, Exelon Generation Company, LLC (Generation), is engaged in the energy generation business. The Company, through its subsidiaries, Commonwealth Edison Company (ComEd), PECO Energy Company (PECO), Baltimore Gas and Electric Company (BGE), Pepco Holdings LLC (PHI), Potomac Electric Power Company (Pepco), Delmarva Power & Light Company (DPL) and Atlantic City Electric Company (ACE), is engaged in the energy delivery businesses. The Company operates through 12 segments: Generation’s six segments: Mid-Atlantic, Midwest, New England, New York, ERCOT and Other Power Regions; ComEd; PECO; BGE, and PHI’s three utility segments: Pepco, DPL and ACE. Generation, ComEd, PECO, BGE, Pepco, DPL and ACE participate in energy markets that are administered by regional transmission organizations (RTOs) and independent system operators (ISOs).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXC – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $44,675,862,737 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -34.76% Fail
6. Moderate PEmg Ratio PEmg < 20 17.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.47 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.58
MG Growth Estimate 2.60%
MG Value $35.38
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $37.46
MG Value based on 0% Growth $21.96
Market Implied Growth Rate 4.69%
Current Price $46.20
% of Intrinsic Value 130.58%

Exelon Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.2 in 2014 to an estimated $2.58 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Exelon Corporation revealed the company was trading above its Graham Number of $41.34. The company pays a dividend of $1.31 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.88, which was below the industry average of 21.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-74.87.

Exelon Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$74.87
Graham Number $41.34
PEmg 17.88
Current Ratio 1.33
PB Ratio 1.34
Current Dividend $1.31
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $13,473,000,000
Total Current Liabilities $10,140,000,000
Long-Term Debt $34,909,000,000
Total Assets $119,485,000,000
Intangible Assets $6,677,000,000
Total Liabilities $86,097,000,000
Shares Outstanding (Diluted Average) 970,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.45
Dec2017 $3.97
Dec2016 $1.22
Dec2015 $2.54
Dec2014 $1.88
Dec2013 $2.00
Dec2012 $1.42
Dec2011 $3.75
Dec2010 $3.87
Dec2009 $4.09
Dec2008 $4.13
Dec2007 $4.05
Dec2006 $2.35
Dec2005 $1.36
Dec2004 $2.78
Dec2003 $1.38
Dec2002 $2.22
Dec2001 $2.21
Dec2000 $0.92
Dec1999 $1.45
Dec1998 $1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.58
Dec2017 $2.54
Dec2016 $1.82
Dec2015 $2.19
Dec2014 $2.20
Dec2013 $2.58
Dec2012 $3.07
Dec2011 $3.92
Dec2010 $3.90
Dec2009 $3.68
Dec2008 $3.29
Dec2007 $2.71
Dec2006 $2.03
Dec2005 $1.91
Dec2004 $2.09
Dec2003 $1.71
Dec2002 $1.78

Recommended Reading:

Other ModernGraham posts about the company

Exelon Corp Valuation – March 2018 $EXC
Exelon Corporation Valuation – July 2016 $EXC
23 Companies in the Spotlight This Week – 3/9/15
Exelon Corporation Annual Valuation – 2015 $EXC
22 Companies in the Spotlight This Week – 11/29/14

Other ModernGraham posts about related companies

NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

NRG Energy Inc Valuation – January 2019 $NRG

Company Profile (excerpt from Reuters): NRG Energy, Inc. (NRG), incorporated on May 29, 1992, is an integrated power company. The Company is engaged in producing, selling and delivering electricity and related products and services in various markets in the United States. The Company’s segments include Generation, Retail and Corporate activities. The Generation segment includes generation and international. The Retail segment includes Mass customers and Business Solutions. The Company’s Business Solutions include commercial, industrial and governmental/institutional (C&I) customers, and other distributed and reliability products. The corporate activities segment includes residential solar and electric vehicle services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NRG – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,730,567,534 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -235.64% Fail
6. Moderate PEmg Ratio PEmg < 20 -8.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -12.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.24 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$4.57
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$66.27
MG Value based on 0% Growth -$38.85
Market Implied Growth Rate -8.68%
Current Price $40.46
% of Intrinsic Value N/A

NRG Energy Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.22 in 2014 to an estimated $-4.57 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into NRG Energy Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.12 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was -8.85, which was below the industry average of 21.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.06.

NRG Energy Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.06
Graham Number $0.00
PEmg -8.85
Current Ratio 1.58
PB Ratio -12.92
Current Dividend $0.12
Dividend Yield 0.30%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,295,000,000
Total Current Liabilities $2,723,000,000
Long-Term Debt $6,658,000,000
Total Assets $11,450,000,000
Intangible Assets $1,141,000,000
Total Liabilities $12,386,000,000
Shares Outstanding (Diluted Average) 299,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.79
Dec2017 -$6.79
Dec2016 -$2.22
Dec2015 -$19.46
Dec2014 $0.23
Dec2013 -$1.22
Dec2012 $1.22
Dec2011 $0.78
Dec2010 $1.84
Dec2009 $3.44
Dec2008 $4.43
Dec2007 $2.01
Dec2006 $2.04
Dec2005 $0.38
Dec2004 $0.93
Dec2003 $6.98
Dec2002 -$8.71
Dec2001 $0.67
Dec2000 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$4.57
Dec2017 -$6.80
Dec2016 -$5.96
Dec2015 -$6.45
Dec2014 $0.22
Dec2013 $0.55
Dec2012 $1.74
Dec2011 $2.16
Dec2010 $2.82
Dec2009 $3.03
Dec2008 $2.53
Dec2007 $1.88
Dec2006 $1.32
Dec2005 $0.65
Dec2004 $0.55
Dec2003 $0.20
Dec2002 -$2.63

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NRG Energy Inc Valuation – March 2018 $NRG

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DTE Energy Co Valuation – January 2019 $DTE
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

DTE Energy Co Valuation – January 2019 $DTE

Company Profile (excerpt from Reuters): DTE Energy Company (DTE Energy), incorporated on January 26, 1995, is an energy company. The Company’s segments include Electric, Gas, Gas Storage and Pipelines, Power and Industrial Projects, Energy Trading, and Corporate and Other. DTE Energy’s utility operations consist of DTE Electric Company (DTE Electric) and DTE Gas Company (DTE Gas). DTE Energy also has three other segments that are engaged in a range of energy-related businesses. DTE Energy’s other businesses are involved in natural gas pipelines, gathering and storage; power and industrial projects, and energy marketing and trading operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DTE – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,686,691,583 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 53.41% Pass
6. Moderate PEmg Ratio PEmg < 20 20.60 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.81 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.52
MG Growth Estimate 4.63%
MG Value $98.04
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $80.06
MG Value based on 0% Growth $46.93
Market Implied Growth Rate 6.05%
Current Price $113.72
% of Intrinsic Value 115.99%

DTE Energy Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.05% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into DTE Energy Co revealed the company was trading above its Graham Number of $84.39. The company pays a dividend of $3.36 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.6, which was below the industry average of 21.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-118.13.

DTE Energy Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$118.13
Graham Number $84.39
PEmg 20.60
Current Ratio 1.47
PB Ratio 1.94
Current Dividend $3.36
Dividend Yield 2.95%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,103,000,000
Total Current Liabilities $2,117,000,000
Long-Term Debt $13,620,000,000
Total Assets $35,292,000,000
Intangible Assets $3,157,000,000
Total Liabilities $24,602,000,000
Shares Outstanding (Diluted Average) 182,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.97
Dec2017 $6.32
Dec2016 $4.83
Dec2015 $4.05
Dec2014 $5.10
Dec2013 $3.76
Dec2012 $3.55
Dec2011 $4.18
Dec2010 $3.74
Dec2009 $3.24
Dec2008 $3.34
Dec2007 $5.70
Dec2006 $2.43
Dec2005 $3.05
Dec2004 $2.49
Dec2003 $2.50
Dec2002 $3.18
Dec2001 $1.44
Dec2000 $3.27
Dec1999 $3.33
Dec1998 $3.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.52
Dec2017 $5.14
Dec2016 $4.45
Dec2015 $4.21
Dec2014 $4.22
Dec2013 $3.75
Dec2012 $3.70
Dec2011 $3.86
Dec2010 $3.70
Dec2009 $3.64
Dec2008 $3.69
Dec2007 $3.66
Dec2006 $2.67
Dec2005 $2.70
Dec2004 $2.54
Dec2003 $2.63
Dec2002 $2.74

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
DTE Energy Co Valuation – March 2018 $DTE
DTE Energy Co Valuation – July 2016 $DTE
58 Companies in the Spotlight This Week – 1/31/15
5 Speculative and Overvalued Companies to Avoid – January 2015

Other ModernGraham posts about related companies

AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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