Evergy Inc (EVRG, Financial) recently experienced a daily loss of 3.44% and a 3-month loss of 10.97%. Despite these setbacks and an Earnings Per Share (EPS) of 3.29, the stock appears to be modestly undervalued. This article aims to provide a comprehensive analysis of Evergy's valuation, encouraging investors to delve deeper into the company's financial performance and prospects.
Company Overview
Evergy Inc is a regulated electric utility serving eastern Kansas and western Missouri. With major operating subsidiaries including Evergy Metro, Evergy Kansas Central, Evergy Missouri West, and Evergy Transmission Co., the utility has a combined rate base of approximately $18 billion. As one of the largest wind energy suppliers in the U.S., Evergy's stock price currently stands at $48.96, contrasting with its GF Value of $63.6, suggesting a potential undervaluation.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the stock's ideal fair trading value. If the stock price significantly deviates from the GF Value Line, it may indicate overvaluation or undervaluation.
According to the GF Value, Evergy (EVRG, Financial) 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
Investing in companies with weak financial strength could result in permanent capital loss. Evergy's financial strength is ranked as 3 out of 10 by GuruFocus, indicating a poor balance sheet. This is largely due to Evergy's cash-to-debt ratio of 0, which is worse than 100% of companies in the Utilities - Regulated industry.
Profitability and Growth
Investing in profitable companies typically carries less risk. Evergy has been profitable for 10 out of the past 10 years, with an operating margin of 22.76%, better than 77.45% of companies in the Utilities - Regulated industry. However, the average annual revenue growth of Evergy is 5.8%, which ranks worse than 60.29% of companies in the industry. The 3-year average EBITDA growth is 3.5%, which ranks worse than 53.19% of companies in the industry.
ROIC vs WACC
Another measure of a company's profitability is the comparison of its Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). For the past 12 months, Evergy's ROIC is 4.14, and its WACC is 5.65.
Conclusion
In conclusion, Evergy (EVRG, Financial) appears to be modestly undervalued. Despite its poor financial condition, the company demonstrates strong profitability. However, its growth ranks worse than 53.19% of companies in the Utilities - Regulated industry. For a more detailed financial overview of Evergy, check out its 30-Year Financials here.
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