uploads/2018/01/PCG-stk-1.jpg

Is PG&E’s Huge Upside Potential Worthy of the Risks?

By

Updated

PG&E Corporation

According to Wall Street analysts’ consensus, PG&E Corporation (PCG) has a mean price target of $55.3 compared to its current market price of $45.2. This difference indicates a potential gain of 22.3% for the stock over the next year.

Among the 14 analysts tracking PG&E stock on January 9, 2018, nine recommended “holds” on the stock, and four recommend “buys.” One analyst rated the stock as a “strong sell.”

Article continues below advertisement

Market performance

PG&E Corporation stock has fallen more than 35% since October 2017. The stock started trading weakly following speculation that its power lines were one of the causes of the California wildfires. The utility suspended its 4Q17 dividend amid mounting uncertainty related to its liabilities linked to the fires in the state.

Valuation

On January 8, 2018, PG&E stock was trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation near 6.0x. Its five-year historical valuation average is ~9.0x. In comparison, utilities are trading at an average valuation multiple of close to 11.0x.

Consequently, PCG is trading at a much cheaper valuation compared to its peers (XLU) (IDU) and its historical valuation. However, PCG’s discounted valuation may not attract investors, mainly due to its recent dividend suspension and its potential liabilities relating to the wildfires.

You can read the whole story in What PG&E Investors Should Know amid Mounting Challenges.

Advertisement

More From Market Realist