Critical Analysis: Pacific Gas & Electric (NYSE:PCG) and Entergy (NYSE:ETR)

Entergy (NYSE:ETR) and Pacific Gas & Electric (NYSE:PCG) are both large-cap utilities companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, earnings, risk, analyst recommendations, valuation and institutional ownership.

Institutional & Insider Ownership

88.1% of Entergy shares are owned by institutional investors. Comparatively, 78.6% of Pacific Gas & Electric shares are owned by institutional investors. 0.5% of Entergy shares are owned by insiders. Comparatively, 0.2% of Pacific Gas & Electric shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

Entergy has a beta of 0.61, meaning that its stock price is 39% less volatile than the S&P 500. Comparatively, Pacific Gas & Electric has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500.

Profitability

This table compares Entergy and Pacific Gas & Electric’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Entergy	14.35%	11.52%	2.68%
Pacific Gas & Electric	9.95%	10.13%	2.17%

Dividends

Entergy pays an annual dividend of $2.40 per share and has a dividend yield of 2.6%. Pacific Gas & Electric pays an annual dividend of $0.10 per share and has a dividend yield of 0.7%. Entergy pays out 59.9% of its earnings in the form of a dividend. Pacific Gas & Electric pays out 9.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Entergy has increased its dividend for 10 consecutive years and Pacific Gas & Electric has increased its dividend for 1 consecutive years. Entergy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Entergy and Pacific Gas & Electric, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Entergy	0	5	11	0	2.69
Pacific Gas & Electric	0	6	6	0	2.50

Entergy currently has a consensus price target of $89.80, indicating a potential downside of 3.63%. Pacific Gas & Electric has a consensus price target of $20.15, indicating a potential upside of 33.71%. Given Pacific Gas & Electric’s higher probable upside, analysts plainly believe Pacific Gas & Electric is more favorable than Entergy.

Valuation and Earnings

This table compares Entergy and Pacific Gas & Electric”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Entergy	$12.31 billion	3.38	$1.06 billion	$4.01	23.24
Pacific Gas & Electric	$24.42 billion	1.65	$2.51 billion	$1.09	13.83

Pacific Gas & Electric has higher revenue and earnings than Entergy. Pacific Gas & Electric is trading at a lower price-to-earnings ratio than Entergy, indicating that it is currently the more affordable of the two stocks.

Summary

Entergy beats Pacific Gas & Electric on 13 of the 17 factors compared between the two stocks.

About Entergy

Entergy Corporation, together with its subsidiaries, engages in the production and retail distribution of electricity in the United States. It generates, transmits, distributes, and sells electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, including the City of New Orleans; and distributes natural gas. It also engages in the ownership of interests in non-nuclear power plants that sell electric power to wholesale customers, as well as provides decommissioning services to other nuclear power plant owners. It generates electricity through gas, nuclear, coal, hydro, and solar power sources. The company sells energy to retail power providers, utilities, electric power co-operatives, power trading organizations, and other power generation companies. The company’s power plants have approximately 24,000 megawatts of electric generating capacity. It delivers electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy Corporation was founded in 1913 and is headquartered in New Orleans, Louisiana.

About Pacific Gas & Electric

PG&E Corp. operates as a holding company, which engages in generation, transmission, and distribution of electricity and natural gas to customers. It specializes in energy, utility, power, gas, electricity, solar and sustainability. The company was founded in 1995 and is headquartered in Oakland, CA.