With a daily loss of 6.36% and a 3-month decline of 13.96%, Exelon Corp (EXC, Financial) has captured the attention of investors, particularly given its Earnings Per Share (EPS) of $2.14. These figures raise an important question: Is Exelon (EXC) modestly undervalued? This article delves into the valuation of Exelon, encouraging readers to explore the comprehensive analysis that follows.
Company Introduction
Exelon serves a significant customer base, providing power and gas to approximately 10 million customers through its six regulated utilities in various states. The company's current stock price of $35.49 per share is set against the backdrop of the GF Value of $39.32, which suggests a potential undervaluation. This juxtaposition of market price and intrinsic value is a gateway to understanding Exelon's financial standing and future prospects.
Summarize GF Value
The GF Value is a unique metric that indicates the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. If Exelon's current market price significantly deviates from the GF Value Line, it suggests a misalignment with its fair value, potentially signaling overvaluation or undervaluation. With a market cap of $35.30 billion, Exelon appears to be modestly undervalued, hinting at a promising long-term return on investment.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
When assessing a company's investment potential, its financial strength is a critical factor to consider. Exelon's financial strength is rated 3 out of 10, which is relatively weak within its industry. This is further highlighted by its cash-to-debt ratio of 0.01, placing it lower than 96.06% of its industry peers. Such metrics are vital in evaluating the risk of permanent capital loss.
Profitability and Growth
Exelon has shown a stable profitability track record, with profitability over the past decade and an operating margin of 17.32%, outperforming 62.25% of its industry competitors. This indicates a fair level of profitability. However, the company's growth narrative is less optimistic. Its 3-year average annual revenue and EBITDA growth rates are significantly lower than industry averages, placing it in a less favorable position in terms of growth.
ROIC vs. WACC
An insightful way to gauge a company's profitability is by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). A ROIC that exceeds WACC suggests value creation for shareholders. Unfortunately, Exelon's recent ROIC of 3.45 is below its WACC of 5.65, indicating potential challenges in generating sufficient returns on investments.
Conclusion
In summary, Exelon Corp (EXC, Financial) presents signs of being modestly undervalued. Despite this, investors should approach with caution due to the company's poor financial condition and less than ideal growth rankings within the Utilities - Regulated industry. For a deeper understanding of Exelon's financial health, investors can review its 30-Year Financials here.
To discover high-quality companies that may offer above-average returns, please visit the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
