Utilities Industry Trends And Its Impact On Unitil Corporation (NYSE:UTL)
Unitil Corporation (NYSE:UTL), a US$757.3m small-cap, is a utility company operating in an industry which has experienced a host of challenges, including the ongoing maintenance of assets, and increased desire by consumers for energy management and conservation. Utilities analysts are forecasting for the entire industry, negative growth in the upcoming year , and an optimistic near-term growth of 11.0% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. In this article, I’ll take you through the energy sector growth expectations, and also determine whether Unitil is a laggard or leader relative to its utilities sector peers.
See our latest analysis for Unitil
What’s the catalyst for Unitil’s sector growth?
Aging asset performance with increased expectations on reliability, and new entrants and disruptive technology, are just some of the few key disruption in utilities. Over the past year, the industry saw growth in the teens, though still underperforming the wider US stock market. Unitil is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 12.0% in the prior year. Furthermore, analysts are expecting the company to continue to grow with its industry peers and deliver a 0.2% growth next year.
Is Unitil and the sector relatively cheap?
The multi-utilities sector’s PE is currently hovering around 18.97x, relatively similar to the rest of the US stock market PE of 19.79x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 10.1% on equities compared to the market’s 10.6%. On the stock-level, Unitil is trading at a PE ratio of 22.5x, which is relatively in-line with the average utilities stock. In terms of returns, Unitil generated 9.4% in the past year, in-line with its industry average.
Next Steps:
Unitil’s future growth prospect aligns with that of the broader market and it is trading in-line with its peers. So if you like its growth prospects, you’ll be paying a fair value for the company. If the stock has been on your watchlist for a while, now may be the time to enter. However, before you make a decision on the stock, I suggest you look at Unitil’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has UTL’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Unitil? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.