WEC Energy Group Inc Valuation – January 2019 $WEC

Company Profile (excerpt from Reuters): WEC Energy Group, Inc., incorporated on June 26, 1981, was a diversified holding company with natural gas and electric utility operations (serving customers in Wisconsin, Illinois, Michigan, and Minnesota), an approximately 60% equity ownership interest in American Transmission Company LLC (ATC) (a federally regulated electric transmission company), and non-utility electric operations through its We Power business, as of December 31, 2016. The Company’s segments include Wisconsin; Illinois; Other States; Electric Transmission; We Power, and Corporate and Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WEC – 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 $22,291,919,446 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.51 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 73.58% Pass
6. Moderate PEmg Ratio PEmg < 20 22.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 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 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.17 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 $3.19
MG Growth Estimate 4.67%
MG Value $56.89
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $46.22
MG Value based on 0% Growth $27.09
Market Implied Growth Rate 6.83%
Current Price $70.65
% of Intrinsic Value 124.18%

WEC Energy Group 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, 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 $2.43 in 2014 to an estimated $3.19 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.83% 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 WEC Energy Group Inc revealed the company was trading above its Graham Number of $47.26. The company pays a dividend of $2.08 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.17, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-65.89.

WEC Energy Group 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) -$65.89
Graham Number $47.26
PEmg 22.17
Current Ratio 0.51
PB Ratio 2.27
Current Dividend $2.08
Dividend Yield 2.94%
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 $1,839,700,000
Total Current Liabilities $3,602,500,000
Long-Term Debt $9,119,000,000
Total Assets $32,562,400,000
Intangible Assets $3,052,800,000
Total Liabilities $22,719,700,000
Shares Outstanding (Diluted Average) 316,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2017 $3.79
Dec2016 $2.96
Dec2015 $2.34
Dec2014 $2.59
Dec2013 $2.51
Dec2012 $2.35
Dec2011 $2.24
Dec2010 $1.93
Dec2009 $1.62
Dec2008 $1.52
Dec2007 $1.42
Dec2006 $1.34
Dec2005 $1.31
Dec2004 $1.29
Dec2003 $1.03
Dec2002 $0.59
Dec2001 $0.93
Dec2000 $0.64
Dec1999 $0.90
Dec1998 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.19
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $2.44
Dec2014 $2.43
Dec2013 $2.28
Dec2012 $2.08
Dec2011 $1.88
Dec2010 $1.66
Dec2009 $1.49
Dec2008 $1.41
Dec2007 $1.33
Dec2006 $1.23
Dec2005 $1.12
Dec2004 $0.99
Dec2003 $0.83
Dec2002 $0.74

Recommended Reading:

Other ModernGraham posts about the company

WEC Energy Group Inc Valuation – March 2018 $WEC
WEC Energy Group Inc Valuation – June 2016 $WEC
Wisconsin Energy Corporation Annual Valuation – 2015 $WEC
16 Companies in the Spotlight this Week – 4/19/14
Wisconsin Energy Corp (WEC) Annual Valuation – 2014

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Xcel Energy Inc Valuation – December 2018 $XEL
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Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
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.

WEC Energy Group Inc Valuation – March 2018 $WEC

Company Profile (excerpt from Reuters): WEC Energy Group, Inc., incorporated on June 26, 1981, was a diversified holding company with natural gas and electric utility operations (serving customers in Wisconsin, Illinois, Michigan, and Minnesota), an approximately 60% equity ownership interest in American Transmission Company LLC (ATC) (a federally regulated electric transmission company), and non-utility electric operations through its We Power business, as of December 31, 2016. The Company’s segments include Wisconsin; Illinois; Other States; Electric Transmission; We Power, and Corporate and Other.

WEC Chart

WEC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WEC – 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 $19,705,750,269 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 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 72.88% Pass
6. Moderate PEmg Ratio PEmg < 20 19.68 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.09 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 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.28 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 $3.17
MG Growth Estimate 4.59%
MG Value $56.13
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $46.02
MG Value based on 0% Growth $26.98
Market Implied Growth Rate 5.59%
Current Price $62.45
% of Intrinsic Value 111.25%

WEC Energy Group 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 Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2014 to an estimated $3.17 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.59% 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 WEC Energy Group Inc revealed the company was trading above its Graham Number of $46.9. The company pays a dividend of $2.08 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.68, 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 $-62.96.

WEC Energy Group Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$62.96
Graham Number $46.90
PEmg 19.68
Current Ratio 0.57
PB Ratio 2.09
Current Dividend $2.08
Dividend Yield 3.33%
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 12/1/2017
Total Current Assets $2,213,500,000
Total Current Liabilities $3,869,300,000
Long-Term Debt $8,746,600,000
Total Assets $31,590,500,000
Intangible Assets $3,053,500,000
Total Liabilities $22,129,100,000
Shares Outstanding (Diluted Average) 316,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.26
Dec2017 $3.79
Dec2016 $2.96
Dec2015 $2.34
Dec2014 $2.59
Dec2013 $2.51
Dec2012 $2.35
Dec2011 $2.24
Dec2010 $1.93
Dec2009 $1.62
Dec2008 $1.52
Dec2007 $1.42
Dec2006 $1.34
Dec2005 $1.31
Dec2004 $1.29
Dec2003 $1.03
Dec2002 $0.59
Dec2001 $0.93
Dec2000 $0.64
Dec1999 $0.90
Dec1998 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.17
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $2.44
Dec2014 $2.43
Dec2013 $2.28
Dec2012 $2.08
Dec2011 $1.88
Dec2010 $1.66
Dec2009 $1.49
Dec2008 $1.41
Dec2007 $1.33
Dec2006 $1.23
Dec2005 $1.12
Dec2004 $0.99
Dec2003 $0.83
Dec2002 $0.74

Recommended Reading:

Other ModernGraham posts about the company

Wisconsin Energy Corporation Annual Valuation – 2015 $WEC
16 Companies in the Spotlight this Week – 4/19/14
Wisconsin Energy Corp (WEC) Annual Valuation – 2014

Other ModernGraham posts about related companies

SCANA Corp Valuation – March 2018 $SCG
Xcel Energy Inc Valuation – February 2018 $XEL
Atmos Energy Corp Valuation – Initial Coverage $ATO
PNM Resources Inc Valuation – Initial Coverage $PNM
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.

WEC Energy Group Inc Valuation – June 2016 $WEC

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 WEC Energy Group Inc (WEC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): WEC Energy Group, Inc., formerly Wisconsin Energy Corporation, is a holding company, which has electric and natural gas utility operations. The Company’s segments are Wisconsin, Illinois, other states, electric transmission, We Power, and corporate and other. The Company’s Wisconsin segment includes the electric and natural gas utility, and non-utility operations of Wisconsin Electric Power Company (Wisconsin Electric), Wisconsin Gas LLC (Wisconsin Gas) and Wisconsin Public Service Corporation (WPS), including Wisconsin Electric’s electric and WPS’s electric and natural gas operations in the state of Michigan. The Company’s Illinois segment includes the natural gas utility and non-utility operations of North Shore Gas Company (NSG), and The Peoples Gas Light and Coke Company (PGL). The Company’s other states segment includes the natural gas utility and non-utility operations of Minnesota Energy Resources Corporation (MERC) and Michigan Gas Utilities Corporation (MGU).

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Downloadable PDF version of this valuation:

ModernGraham Valuation of WEC – 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 $20,674,359,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 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 71.90% Pass
6. Moderate PEmg Ratio PEmg < 20 24.74 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 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -26.86 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

WEC value chart June 2016

EPSmg $2.60
MG Growth Estimate 3.71%
MG Value $41.41
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $37.70
MG Value based on 0% Growth $22.10
Market Implied Growth Rate 8.12%
Current Price $64.32
% of Intrinsic Value 155.31%

WEC Energy Group 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, 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 $2.08 in 2012 to an estimated $2.6 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.12% 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.

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

Stage 3: Information for Further Research

WEC charts June 2016

Net Current Asset Value (NCAV) -$57.99
Graham Number $42.70
PEmg 24.74
Current Ratio 0.85
PB Ratio 2.31
Current Dividend $1.82
Dividend Yield 2.82%
Number of Consecutive Years of Dividend Growth 13

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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 $1,896,400,000
Total Current Liabilities $2,229,800,000
Long-Term Debt $8,955,800,000
Total Assets $29,104,600,000
Intangible Assets $2,999,100,000
Total Liabilities $20,286,300,000
Shares Outstanding (Diluted Average) 317,100,000

Earnings Per Share History

Next Fiscal Year Estimate $2.90
Dec2015 $2.34
Dec2014 $2.59
Dec2013 $2.51
Dec2012 $2.35
Dec2011 $2.24
Dec2010 $1.93
Dec2009 $1.62
Dec2008 $1.52
Dec2007 $1.42
Dec2006 $1.34
Dec2005 $1.31
Dec2004 $1.29
Dec2003 $1.03
Dec2002 $0.72
Dec2001 $0.93
Dec2000 $0.64
Dec1999 $0.90
Dec1998 $0.83
Dec1997 $0.27
Dec1996 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.60
Dec2015 $2.44
Dec2014 $2.43
Dec2013 $2.28
Dec2012 $2.08
Dec2011 $1.88
Dec2010 $1.66
Dec2009 $1.49
Dec2008 $1.41
Dec2007 $1.33
Dec2006 $1.24
Dec2005 $1.14
Dec2004 $1.01
Dec2003 $0.87
Dec2002 $0.79
Dec2001 $0.79
Dec2000 $0.72

Recommended Reading:

Other ModernGraham posts about the company

Wisconsin Energy Corporation Annual Valuation – 2015 $WEC
16 Companies in the Spotlight this Week – 4/19/14
Wisconsin Energy Corp (WEC) Annual Valuation – 2014

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.

Wisconsin Energy Corporation Annual Valuation – 2015 $WEC

WEC_LogoBenjamin 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 Wisconsin Energy Corporation (WEC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wisconsin Energy Corporation is a holding company. The Company conducts its operations in two reportable segments: a utility energy segment and a non-utility energy segment. Its primary subsidiaries are Wisconsin Electric Power Company, Wisconsin Gas LLC and W.E. Power, LLC. The Company’s utility energy segment consists of Wisconsin Electric and Wisconsin Gas, operating together under the trade name of We Energies. We Energies serve approximately 1,128,300 electric customers in Wisconsin and the Upper Peninsula of Michigan and approximately 1,079,800 gas customers in Wisconsin and approximately 445 steam customers in metropolitan Milwaukee, Wisconsin. Its non-utility energy segment consists of We Power, owns and leases to Wisconsin Electric generation plants constructed as part of its Power the Future (PTF) strategy.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

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 $49.05
MG Value $54.60
MG Opinion Fairly Valued
Value Based on 3% Growth $35.24
Value Based on 0% Growth $20.66
Market Implied Growth Rate 5.84%
Net Current Asset Value (NCAV) -$40.53
PEmg 20.19
Current Ratio 0.92
PB Ratio 2.52

Balance Sheet – December 2014

Current Assets $1,535,000,000
Current Liabilities $1,669,000,000
Total Debt $4,186,000,000
Total Assets $15,163,000,000
Intangible Assets $442,000,000
Total Liabilities $10,744,000,000
Outstanding Shares 227,200,000

Earnings Per Share

2014 $2.59
2013 $2.51
2012 $2.35
2011 $2.24
2010 $1.93
2009 $1.62
2008 $1.52
2007 $1.42
2006 $1.34
2005 $1.31
2004 $0.52

Earnings Per Share – ModernGraham

2014 $2.43
2013 $2.28
2012 $2.08
2011 $1.88
2010 $1.66
2009 $1.50

Dividend History

Conclusion:

Wisconsin Energy Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio, and the high PEmg and PB ratios, while the Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, Enterprising 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 $1.66 in 2010 to $2.43 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.84% 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.

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 Wisconsin Energy Corporation (WEC)?  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 Wisconsin Energy Corporation (WEC) 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.

Wisconsin Energy Corp (WEC) Annual Valuation – 2014

WEC_LogoBenjamin 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 5 Undervalued Companies for the Enterprising Investor.  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 Wisconsin Energy Corp (WEC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wisconsin Energy Corporation is a diversified holding company. The Company operates primarily through two segments: a utility energy segment and a non-utility energy segment. Its primary subsidiaries are Wisconsin Electric Power Company (Wisconsin Electric), Wisconsin Gas LLC (Wisconsin Gas) and W.E. Power, LLC (We Power). Its utility energy segment consists of Wisconsin Electric and Wisconsin Gas, operating together under the trade name of We Energies. Its non-utility energy segment derives its revenues primarily from the ownership of electric power generating facilities for long-term lease to Wisconsin Electric. Its non-utility energy segment derives its revenues primarily from the ownership of electric power generating facilities for long-term lease to Wisconsin Electric. As of December 31, 2012, the Company have a 26.2% interest in ATC.

WEC Chart

WEC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

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 $47.61
MG Value $54.94
MG Opinion Fairly Valued
Value Based on 3% Growth $32.80
Value Based on 0% Growth $19.23
Market Implied Growth Rate 6.27%
Net Current Asset Value (NCAV) -$39.63
PEmg 21.05
Current Ratio 1.04
PB Ratio 2.52

Balance Sheet – 12/31/2013

Current Assets $1,551,100,000
Current Liabilities $1,496,400,000
Total Debt $4,363,200,000
Total Assets $14,769,400,000
Intangible Assets $441,900,000
Total Liabilities $10,506,000,000
Outstanding Shares 225,960,000

Earnings Per Share

2013 $2.51
2012 $2.35
2011 $2.18
2010 $1.92
2009 $1.60
2008 $1.52
2007 $1.42
2006 $1.32
2005 $1.25
2004 $0.52

Earnings Per Share – ModernGraham

2013 $2.26
2012 $2.06
2011 $1.86
2010 $1.65
2009 $1.48
2008 $1.35

Dividend History

WEC Dividend Chart

WEC Dividend data by YCharts

Conclusion:

Wisconsin Energy Corp is not suitable for either the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the company’s failings are its low current ratio and its high PEmg and PB ratios.  The Enterprising Investor is concerned about 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 research other opportunities through a review of 5 Undervalued Companies for the Defensive Investor and 5 Low PEmg Companies for the Enterprising Investor.  From a valuation standpoint, the company appears to be fairly valued, having grown its EPSmg (normalized earnings) from $1.48 in 2009 to $2.26 in 2013.  This demonstrated growth supports the market’s implied estimate of 6.27% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the market 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 Wisconsin Energy Corp (WEC)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Wisconsin Energy Corp (WEC) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Sempra Energy Valuation – March 2019 #SRE

Company Profile (excerpt from Reuters): Sempra Energy, incorporated on October 11, 1996, is a holding company. The Company’s principal operating units are Sempra Utilities, which includes its San Diego Gas & Electric Company (SDG&E), Southern California Gas Company (SoCalGas) and Sempra South American Utilities segments, and Sempra Infrastructure, which includes its Sempra Mexico, Sempra Renewables and Sempra LNG & Midstream segments. As of December 31, 2016, SDG&E’s service area covered 4,100 square miles.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRE – March 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 $33,514,994,996 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 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 -13.25% Fail
6. Moderate PEmg Ratio PEmg < 20 29.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 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 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.57 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.15
MG Growth Estimate -1.64%
MG Value $21.70
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $60.18
MG Value based on 0% Growth $35.28
Market Implied Growth Rate 10.48%
Current Price $122.30
% of Intrinsic Value 563.67%

Sempra Energy 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, 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 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 $4.66 in 2015 to an estimated $4.15 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.48% 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 Sempra Energy revealed the company was trading above its Graham Number of $84.66. The company pays a dividend of $3.58 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.47, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-136.52.

Sempra Energy 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) -$136.52
Graham Number $84.66
PEmg 29.47
Current Ratio 0.48
PB Ratio 1.76
Current Dividend $3.58
Dividend Yield 2.93%
Number of Consecutive Years of Dividend Growth 8

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 $3,645,000,000
Total Current Liabilities $7,523,000,000
Long-Term Debt $21,611,000,000
Total Assets $60,638,000,000
Intangible Assets $2,645,000,000
Total Liabilities $41,390,000,000
Shares Outstanding (Diluted Average) 276,476,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.85
Dec2018 $3.42
Dec2017 $1.01
Dec2016 $5.46
Dec2015 $5.37
Dec2014 $4.63
Dec2013 $4.01
Dec2012 $3.48
Dec2011 $5.51
Dec2010 $2.86
Dec2009 $4.52
Dec2008 $4.43
Dec2007 $4.16
Dec2006 $5.38
Dec2005 $3.65
Dec2004 $0.92
Dec2003 $3.03
Dec2002 $2.87
Dec2001 $2.52
Dec2000 $2.06
Dec1999 $1.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.15
Dec2018 $3.53
Dec2017 $3.75
Dec2016 $4.94
Dec2015 $4.66
Dec2014 $4.23
Dec2013 $4.05
Dec2012 $4.10
Dec2011 $4.37
Dec2010 $3.96
Dec2009 $4.48
Dec2008 $4.21
Dec2007 $3.88
Dec2006 $3.55
Dec2005 $2.62
Dec2004 $2.16
Dec2003 $2.66

Recommended Reading:

Other ModernGraham posts about the company

Sempra Energy Valuation – May 2018 $SRE
Sempra Energy Valuation – February 2017 $SRE
Sempra Energy Valuation – October 2015 Update $SRE
Sempra Energy Annual Valuation – October 2014 $SRE

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – February 2019 $NEE
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

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.

Ameren Corp Valuation – March 2019 #AEE

Company Profile (excerpt from Reuters): Ameren Corporation (Ameren), incorporated on August 7, 1995, is a utility holding company. The Company’s primary assets are its equity interests in its subsidiaries, including Ameren Missouri, Ameren Illinois and Ameren Transmission Company (ATXI). The Company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas and Ameren Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. The Ameren Illinois Electric Distribution segment consists of the electric distribution business of Ameren Illinois. The Ameren Illinois Natural Gas segment consists of the natural gas business of Ameren Illinois. The ATXI segment is primarily composed of the aggregated electric transmission businesses of Ameren Illinois and ATXI.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AEE – March 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 $17,540,601,213 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 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 -780.47% Fail
6. Moderate PEmg Ratio PEmg < 20 24.50 Fail
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 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.81 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 $2.93
MG Growth Estimate 15.00%
MG Value $112.68
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $42.44
MG Value based on 0% Growth $24.88
Market Implied Growth Rate 8.00%
Current Price $71.70
% of Intrinsic Value 63.63%

Ameren Corp 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. 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 $1.35 in 2015 to an estimated $2.93 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8% 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 Ameren Corp revealed the company was trading above its Graham Number of $47.77. The company pays a dividend of $1.85 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.5, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-72.59.

Ameren Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$72.59
Graham Number $47.77
PEmg 24.50
Current Ratio 0.57
PB Ratio 2.28
Current Dividend $1.85
Dividend Yield 2.58%
Number of Consecutive Years of Dividend Growth 5

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 $1,533,000,000
Total Current Liabilities $2,687,000,000
Long-Term Debt $7,859,000,000
Total Assets $27,215,000,000
Intangible Assets $411,000,000
Total Liabilities $19,442,000,000
Shares Outstanding (Diluted Average) 246,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2018 $3.32
Dec2017 $2.14
Dec2016 $2.68
Dec2015 $2.59
Dec2014 $2.40
Dec2013 $1.18
Dec2012 -$4.01
Dec2011 $2.15
Dec2010 $0.58
Dec2009 $2.78
Dec2008 $2.88
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $3.02
Dec2004 $2.84
Dec2003 $3.25
Dec2002 $2.61
Dec2001 $3.40
Dec2000 $3.33
Dec1999 $2.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.93
Dec2018 $2.72
Dec2017 $2.34
Dec2016 $1.95
Dec2015 $1.35
Dec2014 $0.64
Dec2013 $0.02
Dec2012 -$0.08
Dec2011 $2.01
Dec2010 $2.09
Dec2009 $2.85
Dec2008 $2.88
Dec2007 $2.90
Dec2006 $2.87
Dec2005 $2.99
Dec2004 $3.01
Dec2003 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Ameren Corp Valuation – May 2018 $AEE
Ameren Corp Valuation – February 2017 $AEE
Ameren Corp Valuation – August 2016 $AEE
Ameren Corporation Analysis – 2015 Update $AEE
21 Companies in the Spotlight This Week – June 14, 2014

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – February 2019 $NEE
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

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.

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

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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

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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

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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.

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