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SCANA Stock Is Weak: Daunting Times for Investors

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Part 2
SCANA Stock Is Weak: Daunting Times for Investors PART 2 OF 4

SCANA’s Discounted Valuation Might Not Attract Investors

Valuation

SCANA (SCG) stock fell sharply, which made it relatively attractive from investors’ valuation perspective. Currently, it’s trading at an EV-to-EBITDA valuation of 8.4x—compared to its five-year historical average valuation of ~10x. It appears to be trading at a discounted valuation to its industry average and historical average.

Broader utilities (XLU) (IDU) continue to trade at a premium valuation compared to their historical average valuation. They used to trade at an EV-to-EBITDA valuation of ~8x–9x. Currently, they’re near a valuation multiple of 11x.

SCANA’s Discounted Valuation Might Not Attract Investors

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Utility giants like Southern Company (SO) and Duke Energy (DUK) are trading at a valuation of ~12x, which is higher than their historical valuation.

Challenging times for investors

The discounted valuation might not attract investors because there’s still huge uncertainty about SCANA’s future. The outcome of the ongoing criminal investigation into the company is going to be crucial for SCANA and its investors. The findings are expected to impact the nuclear plant’s rate recovery.

To add to the woes, rating agency Moody’s downgraded SCANA earlier this month. The review was driven by increasing controversies between the utility and regulators. SCANA stopped the construction of its V.C. Summer nuclear power plant.

Dividend yield

The sharp fall in SCANA stock in the past few months drove it to the apex of the top-yielding utilities among the S&P 500 Utilities Index (XLU). It’s trading at a dividend yield of 5.7%, while the Utilities Select Sector SPDR ETF (XLU), which represents SPX utilities, is trading at a dividend yield of 3.5%.

To learn more about SCANA’s dividend profile, read Don’t Be Deceived by SCANA’s Premium Dividend Yield.

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