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PPL, SRE, and XEL: Analyzing Utilities’ Current Valuation

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Valuation

In this part, we’ll discuss some mid-sized utilities’ valuations, which differentiate them from their peers. PPL (PPL) is trading at a forward PE ratio of 13x based on analysts’ EPS estimates for 2019. PPL appears to be trading at a discounted valuation considering broader utilities’ (XLU) (IDU) average valuation close to 17x–18x. PPL’s five-year historical average valuation is ~14x. The valuation looks attractive compared to PPL’s historical valuation and peers’ average. PPL stock offers a dividend yield of 5.3%—the highest among utilities.

XLU stk

To learn about the biggest utilities’ valuations, read Top Utility Stocks: Analyzing the Current Valuations.

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Sempra Energy

Sempra Energy (SRE), the largest utility by market cap in California, is trading at a forward PE ratio above 19x based on analysts’ earnings estimates. The company’s five-year average historical valuation is ~21x. Sempra Energy stock seems to be trading at a discounted valuation compared to its historical average. Sempra Energy is one of the fastest-growing utilities in the industry. The company’s EPS is expected to grow more than 11% in 2019 compared to last year—higher than many of its peers.

Xcel Energy

Xcel Energy (XEL), another mid-size regulated utility, is trading at a forward PE ratio of 21x based on analysts’ estimated EPS in 2019. Xcel Energy’s average historical valuation is close to 18x. Xcel Energy stock seems to be trading at a fair premium compared to its five-year historical average and peers’ average.

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