Reasons to Add Pampa Energia (PAM) to Your Portfolio Now
Pampa Energia S.A. PAM continues to expand its operations in the generation, transmission and distribution of electricity in Argentina, through its subsidiaries. PAM’s ongoing investments will not only maintain asset quality but also continue to expand its generation portfolio. Given its growth opportunities, the company makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for PAM’s 2023 earnings per share (EPS) has increased 38.9% to $8.21 in the past 90 days.
The consensus estimate for sales is pinned at $1.85 billion, indicating year-over-year growth of 0.9%.
Pampa Energia’s long-term (three to five years) earnings growth rate is 14.65%. The company delivered an average earnings surprise of 159.5% in the last four quarters.
Return on Equity (ROE)
ROE indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, Pampa Energia’s ROE is 23.32%, higher than the industry’s average of 5.41%. This indicates that the company has been utilizing its funds more constructively than its peers in the electric power utility industry.
Debt Position
Currently, PAM’s total debt to capital is 38.81%, much better than the industry’s average of 61.13%.
The time to interest earned ratio at the end of second-quarter 2023 was 3.3. The ratio, being greater than one, substantiates the company’s ability to meet future interest obligations without difficulties.
Growth in Renewable Projects
Since 2018, Pampa Energia has been actively developing wind energy, establishing itself as one of Argentina’s leading renewable energy companies. It continues to add more renewable power through inorganic growth and development of MAT ER projects.
By the end of 2021, PAM started the construction of PEPE IV. This project has an 81-megawatt (MW) capacity with more than $120 million investment. The company has started working on PEPE VI. The first stage will add 94.5 MW, and the second will increase the total capacity to 140 MW. The project will be fully operational by the second half of 2024.
By then, Pampa Energia expects to reach a total renewable capacity of 427 MW, further strengthening its position as one of Argentina’s leading wind power generators.
Price Performance
In the past six months, PAM’s shares have risen 6.9% against the industry’s average decline of 19.2%.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks from the same industry are TransAlta TAC and Vistra Corp. VST, each sporting a Zacks Rank #1 (Strong Buy), and ALLETE ALE, holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TAC’s 2023 EPS indicates a year-over-year increase of 1,912.5%. The company delivered an average earnings surprise of 107.1% in the last four quarters.
The Zacks Consensus Estimate for VST’s 2023 EPS indicates a year-over-year improvement of 220.4%. The same for sales indicates a year-over-year increase of 47.8%.
ALE’s long-term earnings growth rate is 8.1%. The Zacks Consensus Estimate for the company’s 2023 EPS implies year-over-year growth of 8.6%.
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