Investment analysis of Southern Company stock
Southern company, also commonly known as ‘The Southern Company’, is an energy holding company based in Atlanta, Georgia. It was founded in 1984 and has become one of the largest utilities in the aspect of energy and gas products in the United States. It has been recently listed as one of the Fortune 500 companies.
If you are thinking of buying Southern Company stock, then you are in luck as there are a few noteworthy trends when it comes to investing in this energy giant. Firstly, the market capitalization currently sits at a staggering $72.3 billion. This means that buying stock in this company is highly profitable and will bring in high returns. Furthermore, the company’s dividend yield also sits at an impressive 4.52%, so investors can expect to get paid a healthy dividend each year. Finally, the company’s estimated earnings per share have been highly rewarding; they have risen from $2.49 in the last financial year to an estimated $2.62 this year.
For any potential stock buyer, researching the company’s current and projected earnings is essential in making a wise decision. According to S&P Global Market Intelligence, analysts forecast a 21% growth in earnings for the next financial year. The same research also shows a very favorable debt ratio, which stands at 0.50. This ratio is extremely healthy, as it suggests that Southern Company has a substantial ability to pay its short-term and long-term debt.
To get some further insights on whether buying Southern Company stock is right for you, it is also important to seek expert opinions. According to recent news, it is worth noting that five analysts have provided a “buy” rating, 10 have given a “hold” rating, and one has given a “sell” rating to the company’s stock. Prominent ratings assign Southern Company a consensus rating of “Hold”, which is slightly underwhelming for a company of this calibre. Furthermore, analysts have set a twelve-month price target for the stock of $66.70 – slightly higher than the current mid-price of $63.90.
From a technical analysis perspective, Southern Company’s stock looks rather bullish, particularly since the company’s 50-day moving average has experienced an impressive increase of 7.71%. In addition, the stock’s 200-day moving average price stands at $52.60, registering a steep 23.07% rise in comparison to the previous year. These figures are very encouraging and suggest that the stock is gaining popularity among the investment community.
When assessing one’s desire to buy Southern Company stock, it is also important to consider recent developments within the company. In this regard, the Southern Company is currently cutting down its emissions rate in order to comply with the newly proposed Environmental Protection Agency (EPA) regulations. The company is making a $8 billion investment towards transitioning to cleaner and more sustainable energy sources such as solar and wind projects. Furthermore, the company has also announced an additional $6.4 billion investment which will go towards advancing its smart grid technology.
Finally, South Company recently reported a average quarterly revenue growth of 0.1%. As we know, the company’s stock is heavily driven by its revenue. It is clear that the company’s current figures are deeply unsuitable for many investors, potentially creating a bearish trend for the stock’s performance.
Market Outlook for Southern Company stock
When assessing the potential of buying Southern Company stock, the biggest concern is the market outlook of the stock in comparison to its competitors. Research shows that Southern Company’s stock has been lagging behind its sector peers over the past five years, with a total return of 36% compared to the Utilities Index’s 47%. This suggests that in the long-term, Southern Company’s stock is not very lucrative for investors.
Analysts also caution that many of the past trends that have helped the stock are likely to become exhausted. For example, many investors have used Southern Company’s stock as a risk-off hedge as the company has a steady income stream. However, with the recent downturn of the stock, this may no longer be the case. Additionally, many growth investors are overlooking Southern Company due to the company’s relatively low secular growth rate.
When it comes to stock performance, Southern Company is losing out to popular stocks such as Duke Energy and Dominion Energy which have higher dividend yields and better revenue forecasts. In fact, 30-day returns for Dominion Energy’s stock have been 5.5% higher than Southern Company’s. Therefore, it is essential for investors to take these rival companies into consideration when weighing up whether to purchase Southern Company stock.
Political Aspects of Southern Company stock
When making an investment decision, it is essential to consider the political aspects surrounding the stock in question. For example, Southern Company’s stock is heavily dependent on government policy. Furthermore, government decisions can strongly influence how the company’s stock performs. For example, the company’s deregulatory stance could result in a pro-business policy, which in turn could boost its stock price.
In addition, the company is highly exposed to environmental policies, such as the upcoming EPA regulations, as it is one of the largest power producers in the United States. Therefore, investors should carefully assess the political risks associated with investing in this stock. Lastly, it is important to note that Southern Company’s stock may be affected by upcoming political elections, as it is quite sensitive to policy changes which could happen over the course of the election period.
Financial Ratios of Southern Company stock
Finally, to assess the potential of buying Southern Company stock, it is essential to evaluate its financial ratios. First, the company’s beta ratio, which measures volatility, currently stands at 0.12, indicating that the stock is fairly stable. The company’s current ratio is also reasonably healthy, sitting at 0.79.
Southern Company’s quick ratio stands at a slightly lower 0.54. The company’s debt to equity ratio is 0.50. This figure suggests that the company’s ability to pay off its debt is in check. Additionally, the company’s ROE (Return on Equity) currently stands at 9.11%, indicating that the company’s ownership has potential to yield satisfactory returns.
Finally, the company’s price/earnings ratio, often referred to as the ‘market multiple’, stands at 24.67, slightly higher than the industry’s average multiple of 17.33 ̊. This indicates that the stock is quite expensive in comparison to its peers, potentially making it a less attractive investment opportunity.
Analyzing the Risks of Southern Company stock
When analyzing the risks associated with Southern Company’s stock, the biggest issue to consider is its susceptibility to external factors, especially energy-related ones. For example, Southern Company’s stock is heavily reliant on energy prices, which are prone to fluctuating depending on the global economy and political events. Additionally, the company’s plans to transition to renewable energy sources may not be fruitful, as the industry is highly competitive and rapidly changing.
Furthermore, Southern Company’s stock may be negatively impacted by its debt levels, which currently stand at around $41.6 billion. This figure may lead to an increase in risk for current and potential investors of the stock, as any changes in the global interest rate could have an unfavorable impact on the company’s profitability.
In addition to this, it is worth noting that Southern Company has encountered challenges due to its declining demand for electricity. This can be attributed to modest population growth and the sluggish residential housing market in some of the company’s primary regions. Furthermore, the company faces competitive challenges from other power providers, such as Dominion Energy, who have more aggressive pricing tactics.
Prospective Returns on Investment for Southern Company Stock
When assessing the savvy-investor’s ultimate goal of buying Southern Company stock, it is essential to weigh up the reward to risk ratio. On the one hand, the company has a good history of dividend payouts and an impressive revenue growth rate. Furthermore, the company’s revenue forecasts are also relatively healthy. On the other hand, potential investors are met with a high market multiple, an industry full of fierce competitors, and an array of external concerns that may impact Southern Company’s performance.
Therefore, although Southern Company’s stock may seem promising in terms of total returns, the company’s debt levels and the volatile energy sector present a significant risk. As such, it is essential for any investor to consider all of the aforementioned data and factors before committing to buy Southern Company stock.
Analyzing the Valuation of Southern Company Stock
When it comes to assessing the value of Southern Company stock, the most important figure is its price-earnings (PE) ratio. Currently, this ratio is 24.67, significantly higher than the industry average of 17.33. This figure is an indication of the stock’s heightened price, which is largely due to investors having confidence in the company’s current and future growth prospects.
As a result of this, potential investors of Southern Company stock will have to pay more than what they can expect to receive in terms of dividend yield and returns. Additionally, the company’s debt levels may also have an impact on the stock’s valuation, especially given the current steepness of global interest rates.
Finally, it is also essential to look at an average-earnings figure from the last five years in order to determine the company’s estimated growth rate. Southern Company’s earnings per share over the last five years has grown by an average of 7.1%, suggesting that despite its lack of consistency in terms of stock performance, it has been going in the right direction in terms of earnings growth.
Conclusion
Overall, Southern Company stock presents significant risks as well as rewards for investors. When looked at from a fundamental and technical analysis, the company’s stock appears to have potential. However, the company is heavily exposed to external factors, such as environmental regulations, political events, and the volatile energy sector, all of which could negatively impact its stock. Furthermore, the high market multiple and weak revenue figures must be taken into consideration before investing. Therefore, it is essential for potential investors to consider all facts and figures before deciding whether to buy Southern Company stock.
