MGE Energy, Inc. – Value Analysis (NASDAQ:MGEE) : May 8, 2017

Capitalcube gives MGE Energy, Inc. a score of 66.

Our analysis is based on comparing MGE Energy, Inc. with the following peers – DTE Energy Company, CMS Energy Corporation, Alliant Energy Corp, Xcel Energy Inc., WEC Energy Group Inc, American Electric Power Company, Inc., Ameren Corporation, ALLETE, Inc. and Otter Tail Corporation (DTE-US, CMS-US, LNT-US, XEL-US, WEC-US, AEP-US, AEE-US, ALE-US and OTTR-US).

Investment Outlook

MGE Energy, Inc. has a fundamental score of 66 and has a relative valuation of UNDERVALUED.

Fundamental Score

Access our research and ratings on MGE Energy, Inc.

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 (3.11).
  • The market expects MGEE-US to grow faster than its peers and for the company to improve its current ROE.
  • MGEE-US has relatively high profit margins while operating with median asset turns.
  • 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.
  • MGEE-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 pre-tax margin suggests tight control on operating costs versus peers.
  • While MGEE-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 level of capital investment is relatively low and suggests it is milking the business.
  • MGEE-US has the financial and operating capacity to borrow quickly.

Access our research and ratings on MGE Energy, Inc.

Leverage & Liquidity

MGEE-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 15.17% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 36.73%), and a well-cushioned interest coverage level of 7.09x, MGEE-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 9 peers for the company have an outstanding debt balance.

MGEE-US has maintained its Quick & Able profile from the recent year-end.

  • MGEE-US‘s interest coverage is similar to last year’s high of 7.09x, which compares to a low of 6.44x in 2014.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (7.09x) and the peer median (3.50x).
  • MGEE-US‘s debt-EV is similar to last year’s low of 15.17%, which compares to the 2012 high of 24.22%.
  • Like the interest coverage trend, debt-EV has remained relatively stable for both the company (15.17%) and the peer median (36.73%).

Access the detailed analysis for MGE Energy, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
DTE Energy Company 38.82 1.4 2.99 19.46
CMS Energy Corporation 45.36 1.15 3.06 16.96
Alliant Energy Corp 33.41 0.64 3.09 23.08
Xcel Energy Inc. 40.12 0.71 3.39 21.84
WEC Energy Group Inc 35.48 0.9 4.23 19.81
American Electric Power Company, Inc. 38.99 0.46 3.62 21.22
Ameren Corporation 37.98 0.52 3.67 24.91
ALLETE, Inc. 31.37 0.94 3.1 23.01
Otter Tail Corporation 26.59 0.93 3.71 27.92
MGE Energy, Inc. 15.17 2.66 7.09 35.05
Peer Median 36.73 0.92 3.5 22.42
Best In Class 15.17 2.66 7.09 35.05

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Company Profile

MGE Energy, Inc. provides natural gas and electric services. The company operates its business through following segments: Regulated Electric Utility Operations, Regulated Gas Utility Operations, Non-Regulated Energy Operations, Transmission Investments and All Other. The Regulated Electric Utility Operations segment engages in generating, purchasing, and distributing electricity. The Regulated Gas Utility Operations segment engages in purchasing and distributing natural gas. The Non Regulated Energy Operations segment engages in owning and leasing electric generating capacity. The Transmission Investments segment represents investment in American Transmission Company LLC, a company engaged in the business of providing electric transmission services primarily in Wisconsin. The All Other segment invests in companies and property that relate to the regulated operations and financing the regulated operations. MGE Energy was founded in 2001 and is headquartered in Madison, WI.

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