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PG&E’s Valuation Compared to Its Peers

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Nov. 29 2018, Updated 1:45 p.m. ET

Valuation

Currently, PG&E (PCG) stock is trading at a notable discount compared to its historical average and its peers. The stock is trading at a forward PE multiple of 7x based on analysts’ estimated earnings for the next year. PG&E’s five-year historical average PE multiple is ~20x. Peers’ average PE multiple is close to 15x. Investors could shun PG&E due to uncertainty associated with the company despite the discounted valuation.

PG&E hasn’t provided its earnings guidance for 2018 due to uncertainty about wildfire-related charges. The company has suspended its dividends since the fourth quarter of 2017. PG&E stock will likely continue to trade weak due to uncertainty amid the wildfire investigation.

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Peers’ valuation

Sempra Energy (SRE), the largest utility by market cap, is trading at a forward PE multiple above 19x. Sempra Energy is one of the fastest-growing utilities in the industry. The company’s five-year average historical valuation is ~20x. Edison International (EIX) is trading at a forward PE multiple of 12x, while its historical valuation is ~18x.

So far this year, PG&E stock has fallen ~40%, while Edison International (EIX) has fallen ~13%. Sempra Energy (SRE) stock has risen almost 6%, while utilities (XLU) at large have gained 4% year-to-date.

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