7 Most Undervalued Utility Stocks To Buy According To Analysts

4. Sempra (NYSE:SRE)

Upside Potential: 8.10%

Forward P/E Ratio as of October 7: 17.03

Number of Hedge Fund Investors: 29   

Sempra (NYSE:SRE) is a global energy infrastructure company based in California, the company has a diverse portfolio spanning natural gas, electricity, and renewable energy. Sempra (NYSE:SRE) provides services to 40 million customers in both North America and Latin America. The company also has significant investments in liquefied natural gas (LNG) and energy storage facilities.

Sempra (NYSE:SRE) is poised to benefit from the Dallas Fort Worth area being the largest growing metro in the US, with rapid population growth and economic development expected to drive a 40% higher electrical load by 2030. The company has reiterated its 6% to 8% annual long-term adjusted EPS growth rate, with the FAST Graphs analyst consensus expecting 6.9% adjusted EPS growth to $5.13 in 2025 and 7% growth in adjusted EPS to $5.49 in 2026. The company’s financial condition is stable, with an interest coverage ratio of 2.7 and a 46.4% debt-to-capital ratio, which is better than the 60% debt-to-capital ratio that rating agencies desire from the industry. Sempra (NYSE:SRE) possesses a BBB+ credit rating from S&P on a stable outlook.

Sempra’s (NYSE:SRE) valuation is attractive, with a current-year P/E ratio of 17.03, a 4.05% discount to the sector median of 17.75. The company’s dividend is secure and rising, with a 3% forward dividend yield and a payout ratio of around the low 50% range, providing a significant margin of safety. Analysts forecast Sempra’s (NYSE:SRE) earnings will increase by 3.20% this year and expect the company to deliver at least 5% to 6% annual dividend growth in the years ahead. Industry analysts have reached a consensus on the stock’s Buy rating, with an average target price of $88.50 that suggests an 8.10% upside potential from its current levels.