Atmos Energy Corp (ATO, Financial) experienced a marginal daily loss of -0.53 %, with a 3-month gain of 3.78%. The company's Earnings Per Share (EPS) stand at 5.84, prompting the question: Is the stock Fairly Valued? This article aims to answer this question by providing an in-depth valuation analysis of Atmos Energy. We invite you to read on and gain valuable insights into this company's financial health and prospects.
About Atmos Energy
Atmos Energy Corp (ATO, Financial), the largest publicly traded, fully regulated, pure-play natural gas utility in the United States, serves over 3 million customers across eight states. Its operations are primarily concentrated in Texas, contributing to two-thirds of its earnings. The company's current stock price is $117.07, against a GF Value of $119.37, indicating a fair valuation. This assessment is based on a comprehensive analysis of the company's financial performance, market trends, and strategic initiatives.
Understanding the GF Value
The GF Value is a proprietary valuation measure that provides an estimate of a stock's intrinsic value. It is determined based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the fair value at which a stock should ideally be traded. If the stock price significantly deviates from the GF Value Line, it could imply overvaluation or undervaluation, which in turn impacts future returns.
At its current price of $117.07 per share and a market cap of $17.40 billion, Atmos Energy (ATO, Financial) appears to be fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Assessing the financial strength of a company is critical before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. Atmos Energy's cash-to-debt ratio stands at 0.01, ranking lower than 95.23% of companies in the Utilities - Regulated industry. This gives Atmos Energy a financial strength score of 5 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Atmos Energy, with an operating margin of 23.09%, ranks better than 78.24% of companies in its industry. However, its 3-year average annual revenue growth rate of 7.2% ranks lower than 52.78% of companies in the same industry. This suggests that while the company's profitability is fair, its growth could be improved.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to assess its profitability. For the past 12 months, Atmos Energy's ROIC is 4.16, lower than its WACC of 6.47. This discrepancy indicates potential areas for improvement in the company's financial performance.
Conclusion
In conclusion, Atmos Energy's stock appears to be fairly valued. The company's financial condition and profitability are fair, although its growth could be improved. For more detailed financial information on Atmos Energy, you can check out its 30-Year Financials here.
For high-quality companies that may deliver above-average returns, consider visiting the GuruFocus High Quality Low Capex Screener.
