Dominion Resources, Inc. – Value Analysis (NYSE:D) : May 3, 2017

Capitalcube gives Dominion Resources, Inc. a score of 72.

Our analysis is based on comparing Dominion Resources, Inc. with the following peers – SCANA Corporation, CenterPoint Energy, Inc., Ameren Corporation, Duke Energy Corporation, Exelon Corporation, Entergy Corporation, CMS Energy Corporation, FirstEnergy Corp., NiSource Inc and Sempra Energy (SCG-US, CNP-US, AEE-US, DUK-US, EXC-US, ETR-US, CMS-US, FE-US, NI-US and SRE-US).

Investment Outlook

Dominion Resources, Inc. has a fundamental score of 72 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (2.88).
  • D-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • D-US‘s relatively high profit margins are burdened by relative asset inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • D-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While D-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • D-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

D-US is debt-constrained.

  • With debt at a relatively high 41.27% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 48.22%), and interest coverage level of 2.92x, D-US seems debt-constrained.
  • All 10 peers for the company have an outstanding debt balance.

D-US has moved to a relatively high leverage from an Some Capacity profile at the prior year-end.

  • D-US‘s interest coverage is similar to its four-year average interest coverage of 3.13x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (2.92x) and the peer median (2.69x).
  • D-US‘s debt-EV is greater than (but within one standard deviation of) its four-year average debt-EV of 39.75%.
  • Though its debt-EV has remained relatively stable at 41.27% compared to 2015, its peer median has decreased to 48.22% from 49.38% during this period.
  • Relative to peers, debt-EV rose 0.69 percentage points.

Access the detailed analysis for Dominion Resources, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
SCANA Corporation 42 0.73 3.2 17.72
CenterPoint Energy, Inc. 48.22 0.95 2.07 22.58
Ameren Corporation 37.86 0.6 3.62 25.74
Duke Energy Corporation 48.29 0.7 3.2 14.54
Exelon Corporation 52.29 0.92 2.69 28.69
Entergy Corporation 55.64 0.8 2.39 22.68
CMS Energy Corporation 45.36 1.15 3.06 16.96
FirstEnergy Corp. 62.03 0.36 1.91 14.17
NiSource Inc 52.63 0.51 2.41 14.74
Sempra Energy 38.83 0.52 2.56 15.57
Dominion Resources, Inc. 41.27 0.52 2.92 14.41
Peer Median 48.22 0.7 2.69 16.96
Best In Class 37.86 1.15 3.62 28.69

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Company Profile

Dominion Resources, Inc. is an energy company. It supplies electricity and natural gas to homes, businesses and wholesale customers in the Eastern United States. The company operations also include a regulated interstate natural gas transmission pipeline and underground storage system in the Northeast, mid-Atlantic and Midwest states, an LNG import and storage facility in Maryland and regulated gas transportation and distribution operations in Ohio and West Virginia. Its non-regulated operations include merchant generation, energy marketing and price risk management activities and retail energy marketing operations. The company operates its business through three segments: Dominion Virginia Power, Dominion Generation and Dominion Energy. The Dominion Virginia Power segment is engaged in regulated electric distribution, regulated electric transmission and non-regulated retail energy marketing. The Dominion Generation segment is engaged in regulated electric fleet and merchant electric fleet. The Dominion Energy segment is engaged in gas transmission and storage, gas distribution and storage, LNG import and storage. Dominion Resources was founded by William W. Berry in 1983 and is headquartered in Richmond, VA.

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