SCANA (SCG) stock is trading at a fair discount to its historical average and peers’ average. On October 3, 2017, SCANA was trading at an EV-to-EBITDA valuation multiple of 9.3x, while its five-year historical average is near 10.3x. On average, utilities are trading at an EV-to-EBITDA valuation of 11x.
SCANA’s big fall in the last few weeks might have resulted in its fairer valuation. However, investors might overlook the relatively cheaper valuation due to concerns about its abandoned power plant and ongoing criminal probe.
Valuing large-cap utilities
The above chart shows SCANA’s current valuation compared to utility giants. Currently, NextEra Energy (NEE) is trading at an EV-to-EBITDA valuation multiple of 13x, while Duke Energy (DUK) is trading at a valuation ratio of 12x.
Southern Company (SO) stock is trading at an EV-to-EBITDA valuation ratio near 11x. The second-largest regulated utility in the country, Southern Company is also struggling to complete its Vogtle nuclear power plant after Westinghouse’s bankruptcy. Southern Company has seen its stock fall in the last few months, which likely resulted in its relatively fairer valuation compared to its peers.
US utilities (XLU) used to trade at an EV-to-EBITDA ratio near 8x–9x. Now, they’re trading at an average valuation of ~11x. Utilities are trading at a price-to-earnings multiple of 17x–18x, while they used to trade near 15x.