Investment Thesis
Sempra exhibits strong revenue growth and solid operating cash flow, but is critically stressed by massive negative free cash flow (-$6.0B) and a dangerously depleted cash position ($29M) for a $110.9B asset utility company. Declining EPS (-37.8% YoY) despite stable net income suggests significant shareholder dilution, while heavy capex spending ($10.6B) exceeds operational capacity without adequate liquidity reserves.
Strengths
- Strong revenue growth of 10.3% YoY demonstrates demand and operational scale
- Positive operating cash flow of $4.6B supports core business viability
- Conservative leverage ratio of 0.38x debt/equity maintains financial flexibility
- Reasonable operating and net margins (13.1% and 13.4%) for regulated utility sector
Risks
- Unsustainable negative free cash flow of -$6.0B indicating capex spending far exceeds cash generation capacity
- Critically low cash reserves of $29M create significant liquidity stress and operational vulnerability
- EPS declining 37.8% YoY despite net income growth signals severe shareholder dilution from capital raising
- Net income growth (2.3% YoY) significantly trailing revenue growth (10.3%) indicates margin compression and operational pressure
- Extremely low returns on equity (5.8%) and assets (1.7%) suggest capital investments are not generating adequate returns
Key Metrics to Watch
- Free cash flow trajectory and management's plan to achieve positive FCF within 12-24 months
- Cash and equivalents level - any further decline below $100M would signal acute distress
- Interest coverage ratio if debt increases to fund continued capex shortfalls
- EPS stabilization relative to net income growth to assess ongoing dilution
Financial Metrics
Revenue
13.7B
Net Income
1.8B
EPS (Diluted)
$2.75
Free Cash Flow
-6.0B
Total Assets
110.9B
Cash
29.0M
Profitability Ratios
Gross Margin
N/A
Operating Margin
13.1%
Net Margin
13.4%
ROE
5.8%
ROA
1.7%
FCF Margin
-44.1%
Balance Sheet & Liquidity
Current Ratio
1.59x
Quick Ratio
1.57x
Debt/Equity
0.38x
Debt/Assets
0.0%
Interest Coverage
2.90x
Long-term Debt
12.0B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-16T13:33:25.354008 |
Data as of: 2025-12-31 |
Powered by Claude AI