Xcel Energy Inc (XEL, Financial) has seen a 2.46% daily gain, but a 3-month loss of 4.01%. Its Earnings Per Share (EPS) stands at 3.15. The question that remains is whether the stock is modestly undervalued. In the following analysis, we will dive into the valuation of Xcel Energy (XEL), providing a comprehensive overview of its financial strength, profitability, and growth.
Company Introduction
Xcel Energy manages utilities serving 3.7 million electric customers and 2.1 million natural gas customers in eight states. It is one of the largest renewable energy providers in the U.S., with half of its electricity sales coming from carbon-free energy. With its current stock price standing at $59.96 per share and a market cap of $33.10 billion, Xcel Energy's intrinsic value, represented by the GF Value, is estimated at $76.69. This suggests that the stock might be modestly undervalued.
Understanding GF Value
The GF Value is a measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the fair value at which the stock should be traded.
According to GuruFocus Value calculation, Xcel Energy's stock appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength Analysis
Investing in companies with low financial strength can result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before buying shares. Xcel Energy has a cash-to-debt ratio of 0.01, ranking worse than 95.24% of companies in the Utilities - Regulated industry. This suggests a poor balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk. Xcel Energy has been profitable for 10 years over the past 10 years. Its operating margin of 16.01% is better than 60.28% of companies in the Utilities - Regulated industry. The 3-year average annual revenue growth rate of Xcel Energy is 8.1%, ranking better than 51.03% of companies in the industry. The 3-year average EBITDA growth rate is 5.5%, ranking better than 55.36% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can provide insights into its profitability. For the past 12 months, Xcel Energy's ROIC is 4.55, and its WACC is 5.51.
Conclusion
In summary, Xcel Energy's stock appears to be modestly undervalued. The company's financial condition is poor, but its profitability is fair. Its growth ranks better than 55.36% of companies in the Utilities - Regulated industry. To learn more about Xcel Energy stock, you can check out its 30-Year Financials here.
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