Like many of its peers, Sempra Energy (SRE) stock appears to be trading at a fair premium. On October 31, 2017, it was trading at an EV-to-EBITDA valuation multiple of 15.4x—compared to its five-year historical average of 13.0x. Currently, utilities (XLU) (VPU) have an average valuation multiple of 11x. Sempra Energy seems to be trading at a premium compared to its historical average and the industry average.
In comparison, Edison International (EIX), Sempra Energy’s peer in California, has its valuation ratio near 10x. The biggest utility in the state, PG&E (PCG) is trading at a valuation multiple of 8x. PG&E’s discounted valuation might have been due to its recent correction after the wildfires in California.
To learn more about top utilities’ valuations, read Weekly Utility Review: Where Utilities Might Go from Here.
Sempra Energy is one of the fastest-growing utilities in the industry. Its dividend growth is expected to follow its earnings growth in the next few years. Management aims to increase its per share dividend 8%–9% annually—compared to the industry average of 4%–6% for the next few years.
To learn more about Sempra Energy’s dividend profile, read Sempra Energy’s Earnings and Dividend Growth Outlook.