Is It Time To Rethink Sempra (SRE) After A 26% One Year Share Price Gain?

• If you are looking at Sempra and wondering whether the recent share price still offers value, the key question is how the current price lines up with what the business may be worth.
• The stock recently closed at US$92.46, with returns of 1% decline over the past week, 3.6% decline over the past month, a 3.1% gain year to date, and a 26.0% gain over the past year.
• Recent moves in utilities stocks have kept Sempra on many watchlists, as investors weigh how changing expectations around interest rates and capital-intensive infrastructure projects could affect perceived risk. Sector wide discussions about grid investment, energy reliability and regulated returns have also shaped how markets are currently treating utilities such as Sempra.
• Despite this, Sempra scores 0 out of 6 on Simply Wall St’s valuation checks. It is therefore worth looking closely at what different methods like discounted cash flow, multiples and asset based metrics are signalling today, and how a broader valuation framework later in this article could give you an even clearer picture.

Sempra scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Sempra Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting its future cash flows and discounting them back to today using a required rate of return. It is essentially asking what all those future dollars are worth in present terms.

For Sempra, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections in $. The latest twelve month free cash flow is a loss of about $3.99b. Looking ahead, one analyst estimate plus extrapolations point to free cash flow of $1.72b in 2028, with a path that includes projected values such as $5.80b in 2026 and smaller figures in later years as the model tapers growth.

When all projected cash flows are discounted back, Simply Wall St arrives at an estimated intrinsic value of about $22.46 per share. Compared with the recent share price of $92.46, the DCF output suggests Sempra is very expensive on this model, implying a very large premium to the cash flow based estimate.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Sempra may be overvalued by 311.7%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sempra.

Approach 2: Sempra Price vs Earnings

For a profitable company, the P/E ratio is a common way to think about value because it links what you pay for each share to the earnings that support that price. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually points to a lower, more conservative range.

Sempra currently trades on a P/E of 33.63x. That is above both the Integrated Utilities industry average P/E of 19.02x and the peer average of 20.34x. Simply Wall St’s Fair Ratio for Sempra is 28.58x, which is the P/E level it estimates could be reasonable given factors such as earnings growth, profit margins, industry, market cap and risk profile.

The Fair Ratio is more tailored than a simple comparison to peers or the broad industry because it attempts to adjust for company specific traits, rather than assuming all utilities deserve the same multiple. With Sempra’s actual P/E at 33.63x versus a Fair Ratio of 28.58x, the share price currently sits above that customised benchmark.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Sempra Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as your way to attach a clear story to the numbers. This links what you believe about Sempra’s future revenue, earnings and margins to a forecast, and then to a Fair Value that you can compare with today’s price on Simply Wall St’s Community page. On that page, Narratives are updated when new information such as earnings or news arrives. Two investors could look at the same analyst range between US$93.00 and US$115.00 and build very different Narratives. For example, one might focus on the higher US$115.00 outcome with stronger assumptions around long term LNG contributions and utility earnings. Another might be anchored closer to US$93.00 with more conservative views on regulation, capital needs and risk.

Do you think there's more to the story for Sempra? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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