Xcel Energy Inc. Analysis – September 2015 Update $XEL

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 Most Undervalued Companies for the Defensive Investor – August 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 stock analysis showing a specific look at how Xcel Energy Inc. (XEL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Xcel Energy Inc. is a public utility holding company. The Company’s operations include the activity of four wholly owned utility subsidiaries that serve electric and natural gas customers in eight states. These utility subsidiaries are NSP-Minnesota NSP-Wisconsin, Public Service Company of Colorado (PSCo) and Southwestern Public Service Co. (SPS) and serve customers in portions of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. Its segments include regulated electric utility, regulated natural gas utility and all other. The regulated electric utility segment generates, transmits and distributes electricity in Minnesota, Wisconsin, Michigan, North Dakota, South Dakota, Colorado, Texas and New Mexico. Regulated electric utility also includes commodity trading operations. The regulated natural gas utility segment transports, stores and distributes natural gas primarily in portions of Minnesota, Wisconsin, North Dakota, Michigan and Colorado.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of XEL – September 2015

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 $17,219,827,655 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 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 34.05% Pass
6. Moderate PEmg Ratio PEmg < 20 18.50 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.68 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 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -24.36 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

XEL value Chart September 2015

EPSmg $1.83
MG Growth Estimate 2.35%
MG Value $24.22
Opinion Overvalued
MG Value based on 3% Growth $26.60
MG Value based on 0% Growth $15.59
Market Implied Growth Rate 5.00%
Current Price $33.95
% of Intrinsic Value 140.15%

Xcel Energy Inc. qualifies for both the Defensive Investor and for the Enterprising Investor.  The Defensive Investor is only concerned by the low current ratio and the Enterprising Investor is willing to overlook concerns regarding the high level of debt relative to the current assets because the company passes the more conservative Defensive Investor requirements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.59 in 2011 to an estimated $1.83 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5% annual earnings loss 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.

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 Xcel Energy Inc. (XEL)?  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.

Stage 3: Information for Further Research

XEL Charts September 2015

Net Current Asset Value (NCAV) -$47.14
Graham Number $27.43
PEmg 18.50
Current Ratio 0.86
PB Ratio 1.68
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 12



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Most Recent Balance Sheet Figures

Total Current Assets $3,048,922,000
Total Current Liabilities $3,537,251,000
Long-Term Debt $11,896,130,000
Total Assets $37,268,810,000
Intangible Assets $0
Total Liabilities $26,999,740,000
Shares Outstanding (Diluted Average) 508,074,000

Earnings Per Share History

Next Fiscal Year Estimate $1.65
Dec14 $2.03
Dec13 $1.91
Dec12 $1.85
Dec11 $1.72
Dec10 $1.62
Dec09 $1.48
Dec08 $1.46
Dec07 $1.35
Dec06 $1.36
Dec05 $1.23
Dec04 $0.87
Dec03 $1.50
Dec02 -$5.82
Dec01 $2.30
Dec00 $1.54
Dec99 $1.43
Dec98 $1.84
Dec97 $1.61
Dec96 $1.91
Dec95 $1.96

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.83
Dec14 $1.89
Dec13 $1.79
Dec12 $1.69
Dec11 $1.59
Dec10 $1.50
Dec09 $1.42
Dec08 $1.34
Dec07 $1.27
Dec06 $0.77
Dec05 $0.32
Dec04 -$0.06
Dec03 -$0.29
Dec02 -$0.71
Dec01 $1.82
Dec00 $1.60
Dec99 $1.67

Recommended Reading:

Other ModernGraham posts about the company

The 10 Best Stocks For Value Investors This Week – 6/20/15
Xcel Energy Analysis – June 2015 Update $XEL
18 Companies in the Spotlight This Week – 3/21/15
Xcel Energy Inc. Quarterly Valuation – March 2015 $XEL
26 Companies in the Spotlight This Week – 12/13/14

Other ModernGraham posts about related companies

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Xcel Energy Analysis – June 2015 Update $XEL
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NextEra Energy Inc. Quarterly Valuation – May 2015 $NEE
FirstEnergy Corporation Annual Valuation – 2015 $FE
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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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