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PG&E Stock: Is the Valuation Attractive?

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Oct. 10 2018, Updated 11:40 a.m. ET

Valuation

PG&E (PCG) is trading at a forward PE ratio of 12x—based on the estimated EPS in 2019. PG&E’s ratio is lower than its peers’ average forward PE ratio of 14x. Also, PG&E’s five-year historical PE ratio is ~20x.

Edison International (EIX) is trading at a forward PE ratio of 16x, while Sempra Energy (SRE) is trading at a ratio of 20x.

Considering the current EV-to-EBITDA valuation, Sempra Energy stock is trading at a valuation multiple of 17x—much higher than its five-year historical average. In comparison, PG&E seems to be trading at a discount. PG&E is trading at an EV-to-EBITDA multiple of 8x—compared to its five-year historical average valuation multiple of 9x. Edison International is trading at valuation multiple of 9.0x—marginally higher than its five-year historical average.

The above chart shows the comparative stock price movement of PG&E stock along with utilities at large (XLU) and broader markets. PG&E has lost more than $10 billion of its market cap since the stock’s epic descent last year.

PG&E has suspended its dividends since the fourth quarter of 2017 due to mounting uncertainties regarding wildfire-related liabilities. PG&E hasn’t providing its earnings guidance for 2018.

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