Stock Analysis For Empire District Electric

Summary

  1. Empire District Electric Company (NYSE:EDE) is a regulated utility company.
  2. This stock is currently rated a “strong buy”.
  3. It is currently undervalued stock.
  4. Last 12 months net margins and average operating margin of the company are really attractive.
  5. Empire has a negative value of free cash flow margin, which is not a positive signal for the company.
  6. Its revenue growth has been strong over the past five years.

Overview

Empire District Electric Company (NYSE:EDE) purchases, generates, distributes, sells, and transmits electricity in Kansas, Missouri, Arkansas, and Oklahoma. The company was founded in 1909 and is currently based in Joplin, Missouri. Empire operates in three major segments which include gas, electric, and other utilities. The electric segment of the company generates electricity by using natural gas, coal-fired, and hydro plants. It also offer water services to three major towns in Missouri. According to data from last year, it has served 170,000 industrial, residential, wholesale, and commercial customers. This segment owns generating facilities with capacity of 1,280 megawatts. The electricity segment also owns and operates water pumping facilities and distribution systems which consists total of 96 miles of water mains in three communities in Missouri.

Empire’s gas segment distributes natural gas to almost 48 communities and 434 transportation customers, serving approximately 43,200 clients. According to data from 2015, the company’s principal gas utility properties consisted of 87 miles of transmission mains and almost 1,189 miles of distribution mains. Empire is also engage in leasing fiber optics cable and equipment. The company employs 749 full time workers.

Stocks Valuation  

  1. Empire’s market cap is $1.5 billion.
  2. The current share price is $34.26.
  3. The dividend rate announced by the company is $1.04.
  4. Insider ownership of Empire is 0.59%.
  5. The institutional ownership is 47.5%.
  6. Empire’s float is $43.74 million.
  7. Its beta stands at -0.03.
  8. EBITDA of the company is $226.85 million.
  9. Diluted earnings per share are $1.33.

Other Financial Reports

  1. Price/sales ratio

The P/S ratio of company is 2.51 which is based on the sales of trailing 12 months. For those who already own Empire stocks, they are good for holding.

  1. Total debt/equity ratio

Empire’s debt/equity ratio is 109.53% which is too high and clearly not acceptable.

  1. Long term earnings per share growth rate

Inflation adjusted earnings per share growth rate of the company should be greater than 15% and Empire’s value is -1.84% which is not acceptable as it is very low and negative.

  1. Free cash per share

Free cash per share value should be positive as it helps a company to survive losses in a times of crisis. Empire’s value averages to -1.05 which is not acceptable as it is negative.

  1. Three year net profit margin

Three year net profit margin of a company should be greater than 5%. Empire’s value averages to 10.1% which is clearly acceptable as it is fairly greater than the required value.

Stock Analysis

The company has an attractive value of average operating margin of 19.3% over the past four quarters. Last 12 months net margin of Empire was also good at 11.5%. All these are positive signals for those who are interested in buying the company’s stock. However, the revenue growth of Empire has not been strong for nearly five years and stands at -0.9%. Sales of the company have also declined annually by -1.8% over the past five years. The company has trading P/E ratio of 23.3 against the industry average of 20.8. Empire has a negative value of free cash flow margin at -1.3% which is not good for both the company and its investors.

Our Recommendations/Thoughts

According to the investment horizon of 30 days for above average risk tolerance of investors, this company’s stock is currently a “strong buy”. Volatility of the stock is not too risky and the stock is currently undervalued, so it can become a good part of any investor’s portfolio. Although this stock is not a super stock, buying it is going to benefit stock investors.

Note – The writer of this article has no personal links with the company. Readers should consider the recommendations in this article as a financial suggestion and not as confirmed instruction. Readers are advised to look over other data and collect recent information about a company in order to make better investment decisions.

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