Genie Energy Ltd. (GNE) recently acquired a portfolio of residential and small commercial customer contracts from electric utility company Mega Energy.
Michael Stein, GNE’s CEO, said, “Market conditions are producing attractive opportunities for portfolio expansion in some of our retail supply markets.”
He added, “Our strong balance sheet, with significant cash reserves, positions us to compete for additional books of business at favorable prices. We will continue to look for customer acquisition opportunities as specific markets become more conducive to growth.”
Moreover, investors’ interest in utility stocks is evident from the Utilities Select Sector SPDR ETF’s (XLU) 5.4% gains over the past month. This positive sentiment should bode well for GNE in the upcoming terms.
In addition, GNE’s dividend payouts have increased at a marginal CAGR over the past five years. Its current dividend yield is 3.01%, while its four-year average yield is 2.98%.
GNE has gained 79% year-to-date and 91.7% over the past year to close the last trading session at $9.97. Also, it has gained 11.3% over the past month.
Here is what could shape GNE’s performance in the near term:
Solid Bottom Line
For its third quarter that ended September 30, 2022, GNE’s total revenues came in at $81.28 million, down 7.3% year-over-year. However, its revenue from natural gas came in at $6.15 million, up 75% year-over-year.
Its gross profit came in at $43.14 million, up 24.7% year-over-year. Also, its income from operations came in at $23.54 million, up 34.8% year-over-year. Moreover, its net income came in at $18.31 million, compared to a loss of $2.66 million in the previous period. Its EPS came in at $0.70, compared to a loss per share of $0.10 in the prior-year period.
Attractive Valuations
GNE’s trailing-12-month EV/Sales of 0.53x is 87% lower than the industry average of 4.05x. Its trailing-12-month EV/EBITDA of 1.98x is 85.1% lower than the industry average of 13.31x.
In addition, its trailing-12-month Price/Sales of 0.75x is 66% lower than the industry average of 2.19x, while its trailing-12-month Price/Cash Flow of 2.15x is 80.5% lower than the industry average of 11.02x.
Robust Profitability
GNE’s trailing-12-month gross profit margin of 49.45% is 26.9% higher than the industry average of 38.98%. Its trailing-12-month net income margin of 28.87% is 156.5% higher than the industry average of 11.25%.
In addition, its trailing-12-month ROCE, ROTC, and ROTA of 43.19%, 45.08%, and 38.20%, compared with the industry averages of 9.17%, 3.81%, and 2.58%, respectively.
POWR Ratings Reflect Promising Outlook
GNE has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GNE has an A grade for Value, consistent with its lower-than-industry valuation multiples.
It has a B grade for Growth, in sync with its solid bottom line performance in the 2022 third quarter.
In the 67-stock Utilities – Domestic industry, GNE is ranked first.
Click here for the additional POWR Ratings for GNE (Momentum, Stability, Sentiment, Quality).
View all the top stocks in the Utilities – Domestic industry here.
Bottom Line
GNE possesses solid fundamental strength. Moreover, the utilities global market is expected to grow at a CAGR of 6.2% until 2030. Also, utilities are considered a recession-resistant sector, and GNE should continue to witness significant investors’ attention considering the current economic scenario.
So, given the stock’s attractive valuations, robust profitability, and favorable industry outlook, I think GNE might be an ideal buy now.
How Does Genie Energy Ltd. (GNE) Stack up Against Its Peers?
While GNE has an overall POWR Rating of A, one might consider looking at its industry peers, Brookfield Infrastructure Corporation (BIPC), which has an overall A (Strong Buy) rating, and Portland General Electric Company (POR), which has an overall B (Buy) rating.
GNE shares were trading at $10.17 per share on Friday morning, up $0.20 (+2.01%). Year-to-date, GNE has gained 91.09%, versus a -18.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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