PG&E Corp Valuation – July 2016 $PCG

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 - July 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 PG&E Corp (PCG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PG&E Corporation is a holding company. The Company’s primary operating subsidiary is Pacific Gas and Electric Company (the Utility). The Utility’s operations include sale and delivery of electricity and natural gas to customers. The Utility generates electricity and provides electricity transmission and distribution services throughout its service territory in northern and central California to residential, commercial, industrial and agricultural customers. The Utility provides electricity, transmission and distribution services to customers in its service territory. The Utility owns over 18,400 circuit miles of interconnected transmission lines operating at voltages ranging from 60 Kilovolts to 500 Kilovolts. The Utility also operated over 90 electric transmission substations with a capacity of over 63,400 Megavolt amperes (MVA). The Utility’s electric transmission system is interconnected with electric power systems in the Western Electricity Coordinating Council.

PCG Chart

PCG data by YCharts

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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 PCG – July 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 $31,617,754,436 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 -12.59% Fail
6. Moderate PEmg Ratio PEmg < 20 24.18 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.91 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 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -48.59 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

PCG value chart July 2016

EPSmg $2.64
MG Growth Estimate 1.31%
MG Value $29.39
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $38.35
MG Value based on 0% Growth $22.48
Market Implied Growth Rate 7.84%
Current Price $63.94
% of Intrinsic Value 217.53%

PG&E 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, 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 Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2012 to an estimated $2.64 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.84% 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.

PG&E 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) -$85.66
Graham Number $51.74
PEmg 24.18
Current Ratio 0.94
PB Ratio 1.91
Current Dividend $1.82
Dividend Yield 2.85%
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 3/1/2016
Total Current Assets $5,634,000,000
Total Current Liabilities $5,974,000,000
Long-Term Debt $16,522,000,000
Total Assets $64,650,000,000
Intangible Assets $0
Total Liabilities $48,038,000,000
Shares Outstanding (Diluted Average) 495,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.55
Dec2015 $1.79
Dec2014 $3.06
Dec2013 $1.83
Dec2012 $1.92
Dec2011 $2.10
Dec2010 $2.82
Dec2009 $3.20
Dec2008 $3.63
Dec2007 $2.78
Dec2006 $2.76
Dec2005 $2.37
Dec2004 $10.57
Dec2003 $1.06
Dec2002 -$2.36
Dec2001 $3.02
Dec2000 -$0.11
Dec1999 -$0.27
Dec1998 $1.88
Dec1997 $1.75
Dec1996 $1.75

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.64
Dec2015 $2.17
Dec2014 $2.36
Dec2013 $2.13
Dec2012 $2.43
Dec2011 $2.76
Dec2010 $3.07
Dec2009 $3.12
Dec2008 $3.52
Dec2007 $3.62
Dec2006 $3.65
Dec2005 $3.71
Dec2004 $3.73
Dec2003 $0.30
Dec2002 $0.09
Dec2001 $1.29
Dec2000 $0.62

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – May 2015
PG&E Corporation Annual Valuation – 2015 $PCG
16 Companies in the Spotlight this Week – 4/19/14
PG&E Corp (PCG) Annual Valuation – 2014

Other ModernGraham posts about related companies

SCANA Corporation Valuation – July 2016 $SCG
Exelon Corporation Valuation – July 2016 $EXC
DTE Energy Co Valuation – July 2016 $DTE
AES Corporation Valuation – July 2016 $AES
FirstEnergy Corp Valuation – July 2016 $FE
Edison International Valuation – July 2016 $EIX
WEC Energy Group Inc Valuation – June 2016 $WEC
CenterPoint Energy Inc Valuation – June 2016 $CNP
Southern Company Valuation – June 2016 $SO
CMS Energy Corp Valuation – June 2016 $CMS


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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.