The inflation rate fell to 6.4% in January but remains far above the Fed's long-term target of 2%. While high inflation is unequivocally bad for consumers, necessary items like utilities ride out inflationary periods well due to their stable demand. On top of it, the global utilities market is expected to reach $8.31 trillion in 2027, growing at a CAGR of 6.8%.
Genie Energy Ltd. (GNE) and its subsidiaries supply electricity and natural gas to residential and small business customers internationally. It has three operational segments: Genie Retail Energy (GRE); GRE International; and Genie Renewables.
Last year, in the month of November, the company acquired a portfolio of residential and small commercial customer contracts from Mega Energy. This acquisition is backed by its strong cash flows and should enable GNE to expand its footprint across seven states of retail supply markets.
The stock has gained 72.6% over the past nine months and 106.1% over the year to close the last trading session at $12.43, higher than its 50-day and 200-day moving averages of $10.95 and $9.59, respectively.
Here’s what could influence GNE’s performance in the upcoming months:
Strong Financials
For the fiscal third quarter that ended September 30, 2022, GNE’s gross profit increased 24.7% year-over-year to $43.14 million. The company’s income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.3% from the year-ago value to $24.50 million.
Also, its net income attributable to common stockholders came in at $18.31 million compared to a net loss of $2.66 million in the prior-year period. In addition, its EPS stood at $0.70 compared to a net loss per share of $0.10 in the same quarter last year.
Discounted Valuation
In terms of trailing 12-month EV/Sales, GNE is currently trading at 0.71x, 82.4% lower than the industry average of 4.05x. Its trailing 12-month EV/EBITDA multiple of 2.68 is 79.5% lower than the industry average of 13.05. In addition, the stock’s trailing 12-month EV/EBIT multiple of 2.72 is 88.2% lower than the industry average of 22.99x.
Solid Profitability
GNE’s 28.87% trailing-12-month net income margin is 172.5% higher than the 10.59% industry average. Likewise, its trailing-12-month ROCE is 43.19%, compared to the 8.97% industry average.
Furthermore, the stock’s 26.20% trailing-12-month EBIT margin is 44.8% higher than the 18.09% industry average. Its 1.52x trailing-12-month asset turnover ratio is 552.6% higher than the 0.23x industry average.
Attractive Dividend
On February 9, the company declared its fourth quarter’s dividend of $0.075 per share of Class A and Class B common stock, payable on March 1, 2023. GNE’s four-year average dividend yield is 2.93%, and its current annual dividend of $0.30 translates to a 2.41% yield on prevailing prices.
POWR Ratings Reflect Robustness
GNE's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GNE has an A grade for Value, consistent with its lower-than-industry valuation.
It also has an A grade for Momentum, in sync with the stock trading higher than its moving averages. The stock has a B grade for Growth, justified by its solid bottom-line growth in the third quarter.
Within the Utilities - Domestic industry, it is ranked first out of 64 stocks.
Click here to see the additional POWR Ratings for GNE (Stability, Sentiment, and Quality).
View all the top stocks in the Utilities - Domestic industry here.
Bottom Line
Despite the uncertain macroeconomic conditions, GNE has maintained a strong momentum based on its fundamental strength. As utilities are considered a recession-resistant sector, GNE is expected to benefit significantly. Given its high profitability and discounted valuation, it could be wise to buy the utilities stock now.
How Does Genie Energy Ltd. (GNE) Stack up Against Its Peers?
In addition to GNE, which has an overall POWR Rating of A, investors could also consider looking at its industry peer Brookfield Infrastructure Corporation (BIPC), which also has an overall A rating.
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GNE shares were trading at $12.28 per share on Wednesday afternoon, down $0.15 (-1.21%). Year-to-date, GNE has gained 19.47%, versus a 4.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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