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Investment Opportunities

Is PG&E Stock Undervalued or Overvalued Before Earnings?

PG&E (NYSE: PCG) is a $23 billion company today. Investors that bought shares one year ago are sitting on a -27.45% total return. That’s below the S&P 500’s return of 26.85%.

PG&E stock is underperforming the market. It’s beaten down, but it reports earnings soon. So is it a good time to buy? To answer this question we’ve turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

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Earnings-per-Share (EPS) Growth: PG&E reported a recent EPS growth rate of 38.96%. That’s below the electric utilities industry average of 190.79%. That’s not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the electric utilities industry is 44.6. And PG&E’s ratio comes in at 9.84. It’s trading at a better value than many of its competitors.

Debt-to-Equity: The debt-to-equity ratio for PG&E stock is 94.31%. That’s below the electric utilities industry average of 112.89%. That’s a good sign. PG&E’s debt levels are not out of control.

Free Cash Flow per Share Growth: PG&E has decreased its FCF per share over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth.

Profit Margins: The profit margin of PG&E comes in at 12.24% today. And generally, the higher, the better. We also like to see this ratio above competitors. PG&E’s profit margin is below the electric utilities average of 30.69%. So that’s a negative indicator for investors.

Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for PG&E is 9.02% and that’s below its industry average ROE of 12.22%.

PG&E stock passes two of our six key metrics today. That’s why our Investment U Stock Grader gives it a Hold with Caution.

pg&e stock pg&e earnings 2

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing.

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