Pinnacle West Capital CorporationPNWNYSE
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Executive Summary

Latest Data: Dec 2024
UtilitiesRegulated Electric
$11.9BLarge Cap

A mid-sized company, with solid profitability valued in line with the market.

Key Investment Themes
Mature business (9% growth)
Solid 12% profitability

Business Narrative

Pinnacle West Capital Corporation, through its subsidiary, Arizona Public Service Company, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include approximately 5,814 pole miles of overhead lines and approximately 74 miles of underground lines; and distribution facilities comprise approximately 11,258 miles of overhead lines and approximately 22,821 miles of underground primary cable, as well as owns and maintains 475 transmission and distribution substations.

UtilitiesRegulated Electric
Capital Intensive
medium confidence
Revenue Mix
Single segment business
Bull Case
  • +Solid profitability with room for margin expansion
Bear Case
  • -Negative free cash flow may necessitate future capital raises

Company at a Glance

Revenue Growth
9%
Profit Margin
12%
Free Cash Flow
-$639M
P/E Ratio
20.0x
+26% vs 5Y avg
IN-LINE

Business Performance

Business Scale
Revenue$5.1B
Net Income$609M
Profitability Quality
Gross Margin42%
Operating Margin20%
Net Margin12%
Growth Trajectory
Revenue Growth
9%
EPS Growth
21%
FCF Growth
-0%

Key Highlights

Watch Areas

  • Negative free cash flow - burning cash
  • Current liabilities exceed current assets

Financial Health

Liquidity
Concern
Current Ratio0.59
<1.0 = Weak
Cash & Equivalents$4M
Leverage
Watch
Debt / Equity1.64
1.0-2.0 = Moderate
Interest Coverage2.68x
2-5x = Adequate
Efficiency
Concern
Return on Equity9.0%
8-15% = Fair
Return on Capital3.5%
<8% = Weak

Valuation Assessment

Market Cap
$11.9B
Large Cap
P/E (TTM)
20.0x
In-line
vs 5Y avg: 15.8x (+26%)
P/S (TTM)
2.2x
In-line
vs 5Y avg: 2.0x (+10%)
EV/EBITDA
12.4x
In-line
vs 5Y avg: 10.1x
(+23%)
P/E Historical Range (5Y)
Min: 12.9xAvg: 15.8xNow: 20.0xMax: 17.8x
P/S Historical Range (5Y)
Min: 1.7xAvg: 2.0xNow: 2.2xMax: 2.5x
EV/EBITDA Historical Range (5Y)
Min: 9.5xAvg: 10.1xNow: 12.4xMax: 10.6x

Valuation Corridor

EXPENSIVE
PEG Ratio
0.95
P/E 20.0x / Growth 21.0% = Attractive
FCF Yield
-6.0%
vs Cost of Capital ~8.0% = Weak
P/E Corridor (5Y)20.0x
12.9xFair: 14.0x-17.6x17.8x
P/S Corridor (5Y)2.2x
1.7xFair: 1.7x-2.3x2.5x
EV/EBITDA Corridor (5Y)12.4x
9.5xFair: 9.7x-10.5x10.6x

Detailed Financials

Comprehensive financial statement data for deep analysis

MetricDec 20Dec 21Dec 22Dec 23Dec 24
Return on Equity
-
-
-
-
-
Return on Invested Capital
-
-
-
-
-
Gross Margin
45.6%
44.6%2.1%
39.5%11.5%
39.3%0.5%
41.7%6.2%
Operating Margin
22.0%
21.2%3.6%
16.9%20.1%
17.6%3.8%
19.7%12.5%
Net Margin
15.3%
16.3%6.0%
11.2%31.2%
10.7%4.5%
11.9%11.2%
Earnings Yield
-
-
-
-
-
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