Edison International – Value Analysis (NYSE:EIX) : December 14, 2016

Capitalcube gives Edison International a score of 38.

Our analysis is based on comparing Edison International with the following peers – Hawaiian Electric Industries, Inc., PNM Resources, Inc., Pinnacle West Capital Corporation, Portland General Electric Company, PG&E Corporation, American Electric Power Company, Inc., Xcel Energy Inc., FirstEnergy Corp., Avista Corporation and Sempra Energy (HE-US, PNM-US, PNW-US, POR-US, PCG-US, AEP-US, XEL-US, FE-US, AVA-US and SRE-US).

Investment Outlook

Edison International has a fundamental score of 38 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • Edison International’s current Price/Book of 1.66 is about median in its peer group.
  • The market expects EIX-US to grow faster than its peers and for the company to improve its current ROE.
  • EIX-US‘s relative asset efficiency and net profit margins are both around the median level.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • EIX-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • While EIX-US‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median P/E ratio and may be factoring in some sort of a strategic play.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • EIX-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

EIX-US is debt-constrained.

  • With debt at a relatively high 32.01% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 38.99%), and interest coverage level of 3.34x, EIX-US seems debt-constrained.
  • All 10 peers for the company have an outstanding debt balance.

EIX-US has maintained its Some Capacity profile from the recent year-end.

  • EIX-US‘s interest coverage is downward trending and is now similar to its five-year average interest coverage of 3.65x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (3.34x) and the peer median (3.26x).
  • EIX-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 56.02% in 2011.
  • The decrease in its debt-EV to 32.01% from 36.21% (in 2015) was also accompanied by a decrease in its peer median during this period to 38.99% from 41.50%.
  • Relative to peers, debt-EV fell 1.69 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Hawaiian Electric Industries, Inc. 38.16 N/A 3.61 28.22
PNM Resources, Inc. 49.89 0.57 0.84 15.88
Pinnacle West Capital Corporation 33.39 0.87 4.3 28.38
Portland General Electric Company 38.63 1.06 3.19 22.59
PG&E Corporation 36.58 0.92 2.71 31.11
American Electric Power Company, Inc. 40.6 0.76 3.54 22.9
Xcel Energy Inc. 41.39 0.89 3.45 21.68
FirstEnergy Corp. 63.02 0.49 2.19 14.05
Avista Corporation 40.45 0.83 3.26 21.73
Sempra Energy 38.99 0.43 2.42 14.88
Edison International 32.01 0.49 3.34 25.97
Peer Median 38.99 0.8 3.26 22.59
Best In Class 32.01 1.06 4.3 31.11

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Company Profile

Edison International operates as a holding company, which engages in the provision of generating and distributing electric power. It includes investing in infrastructure and energy assets, including renewable energy. The company was founded on April 20, 1987 and is headquartered in Rosemead, CA.

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