Long-established in the Utilities - Regulated industry, PG&E Corp (PCG, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.08%, juxtaposed with a three-month change of 7.4%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of PG&E Corp.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 3/10
- Profitability rank: 6/10
- Growth rank: 2/10
- GF Value rank: 5/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned PG&E Corp a GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding PG&E Corp's Business
PG&E Corp, with a market cap of $51.22 billion and sales of $24.78 billion, operates primarily through its main subsidiary, Pacific Gas and Electric. This regulated utility serves 5.3 million electricity customers and 4.6 million gas customers across Central and Northern California. Notably, PG&E operated under bankruptcy court supervision from January 2019 to June 2020, following a previous reorganization in 2004 where it sold its unregulated assets.
Financial Strength Breakdown
PG&E Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 1.5 positions it worse than 83.48% of 460 companies in the Utilities - Regulated industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 0.55, suggesting potential financial distress. Additionally, the low cash-to-debt ratio at 0.02 indicates a struggle in handling existing debt levels. The debt-to-equity ratio is 2.31, which is worse than 88.66% of 485 companies in the industry, and the debt-to-Ebitda ratio is 7, above Joel Tillinghast's warning level of 4.
Growth Prospects
A lack of significant growth is another area where PG&E Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -8% per year over the past three years, which underperforms worse than 94% of 500 companies in the Utilities - Regulated industry. Stagnating revenues may pose concerns in a fast-evolving market.
Conclusion
Considering PG&E Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. For investors seeking more robust opportunities, exploring companies with stronger GF Scores might be advisable. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
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.
