Sempra Energy

Based on the technical, fundamental, valuation, and risk analysis provided, here is a comprehensive assessment of SRE.

Technical Analysis SRE shows encouraging recovery momentum, trading near its 52-week high with solid short-term gains. However, its position suggests it may be approaching overbought territory, and its history of a significant drawdown indicates vulnerability to pullbacks. The stock's lower beta implies it may offer relative stability but with less upside during strong market rallies.

Fundamental Analysis The company's core operations appear stable, as evidenced by consistent revenue growth and healthy operating margins. However, profitability has been severely impacted by a recent large tax expense, and key efficiency metrics like ROE and asset turnover are weak. While the balance sheet shows moderate leverage, negative free cash flow is a concern for financial flexibility.

Valuation SRE's valuation presents a major red flag. Its forward P/E of 154.6 and EV/EBITDA of 54.34 are exceptionally high, strongly indicating the stock is overvalued. The negative PEG ratio further suggests a lack of positive earnings growth expectations to justify the current price.

Risk Assessment The primary risk is not volatility, as the stock's low beta indicates relative stability. The more significant risks are fundamental, including the potential for continued weak profitability, liquidity constraints from negative cash flow, and the substantial downside risk inherent in its high valuation.

Investment Recommendation

Based on the analysis, SRE is not a compelling buy at its current price. While its stable utility operations and technical rebound are positive, these are overshadowed by severe overvaluation and weak underlying profitability. Investors should wait for a more attractive entry point or for clearer signs of improved fundamental performance, such as sustained earnings growth and positive free cash flow. For now, the risk/reward profile appears unfavorable.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the comprehensive analysis provided, the 12-month outlook for SRE is cautious. The key catalyst for any potential upside would be a significant improvement in core profitability and a return to positive free cash flow, which could begin to justify its lofty valuation. The primary risks are substantial and center on its extreme overvaluation and weak underlying fundamentals, leaving the stock highly vulnerable to a correction if earnings disappoint or market sentiment sours. Given the absence of a specific analyst target and the concerning valuation metrics (P/E of 154.6), a prudent target range would be contingent on a material fundamental improvement; otherwise, the stock faces a high risk of trading significantly below its current price near $93.

Wall Street Consensus

Most Wall Street analysts are optimistic about Sempra Energy's 12-month outlook, with consensus target around $92.97, indicating expected upside potential.

Overall, SRE has investment potential but also faces challenges. Here are key factors to weigh before investing.

SRE has demonstrated strong recovery momentum over the past year, rebounding significantly from its 52-week lows despite recent mixed performance. The stock shows impressive gains from its cyclical trough but faces resistance near its peak levels, indicating a critical technical juncture.

The stock delivered solid short-term gains with a 5.13% 1-month return, though its 3-month performance remains modest at 0.81%. Notably, SRE has slightly underperformed the broader market by 1.04% over this period, displaying its characteristic lower volatility given its beta of 0.75, which suggests more conservative movement relative to market swings.

Currently trading at $92.97, SRE sits near the upper end of its 52-week range, approximately 3% below its $95.74 high. This positioning, combined with a substantial 26.84% maximum drawdown over the past year, suggests the stock is approaching overbought territory but remains vulnerable to pullbacks given its recent volatility pattern.

Revenue & Profitability SRE demonstrated sequential revenue growth from $3.0 billion in Q2 to $3.2 billion in Q3 2025, though profitability deteriorated significantly. The net income ratio plunged from 15.8% to just 3.0%, primarily due to a substantial $482 million tax expense that compressed net income to $95 million. Operating margins remained relatively stable at approximately 19-20%, indicating core operations maintained efficiency despite the tax impact.

Financial Health The company maintains moderate leverage with a debt-to-equity ratio of 1.08 and total debt to capitalization of 52%, though interest coverage is thin at 1.56 times. Concerningly, free cash flow per share was negative ($2.22) while operating cash flow coverage ratios appear weak, suggesting potential liquidity constraints despite a healthy current ratio of 1.59.

Operational Efficiency SRE shows weak returns with ROE at 0.30% and ROA at 0.09%, reflecting minimal profitability relative to its asset base. Asset turnover of 0.03 indicates inefficient utilization of the company's substantial asset base, while fixed asset turnover of 0.06 suggests challenges in generating revenue from long-term investments characteristic of utility operations.

Based on the available data, SRE appears to exhibit conflicting valuation signals. While the trailing P/E ratio of 23.23 could be considered reasonable for certain sectors, the extremely high forward P/E of 154.6 and elevated EV/EBITDA of 54.34 strongly suggest the stock is overvalued. This is further supported by a negative PEG ratio, indicating that earnings growth expectations are likely negative.

A peer comparison using industry average data is not feasible as the provided information is unavailable. Consequently, it is impossible to determine if SRE's valuation multiples are high or low relative to its direct competitors. An accurate assessment of its relative valuation requires specific industry benchmark data for comparison.

Volatility Risk: With a beta of 0.752, SRE exhibits lower volatility than the broader market, indicating relative stability. However, its one-year maximum drawdown of -26.84% demonstrates a significant capacity for loss during adverse market conditions.

Other Risks: The absence of short interest suggests the market holds a generally positive or neutral view on the stock, eliminating this as a immediate concern. Investors should remain attentive to company-specific operational factors and broader sector-wide risks that could impact liquidity or valuation.