Southwest Gas Holdings, Inc. (NYSE: SWX)

Sector: Utilities Industry: Utilities - Regulated Gas CIK: 0001692115
Market Cap 5.04 Bn
P/B 1.77
P/E 19.06
P/S 1.48
ROIC (Qtr) 6.53
Div Yield % 3.32
Rev 1y % (Qtr) -11.76
Total Debt (Qtr) 3.51 Bn
Debt/Equity (Qtr) 0.89
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About

Southwest Gas Holdings, Inc. (SWX) operates in the utilities sector, specifically focusing on natural gas distribution services. The company's operations span across Arizona, Nevada, and California, serving approximately 2.2 million customers through its two segments: natural gas distribution and utility infrastructure services. The natural gas distribution segment, accounting for around 85% of the company's total revenue, is the primary revenue generator. This segment provides regulated natural gas delivery services to residential, commercial,...

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Investment thesis

Bull case

  • Operating cash flow of 675.95M provides strong 45.45x coverage of stock compensation 14.87M, indicating sustainable incentive practices.
  • Strong tangible asset base of 10.32B provides 2.94x coverage of total debt 3.51B, indicating robust asset backing and low credit risk.
  • Robust tangible asset base of 10.32B provides 23.51x coverage of working capital 438.79M, indicating strong operational backing.
  • Operating cash flow of 675.95M provides solid 0.84x coverage of current liabilities 804.70M, showing strong operational health.
  • Tangible assets of 10.32B provide robust 15.04x coverage of other current liabilities 685.77M, indicating strong asset backing.

Bear case

  • Operating cash flow of 675.95M barely covers its investment activities of (19.06M), with a coverage ratio of -35.46, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 675.95M provides thin coverage of dividend payments of (178.34M) with a -3.79 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of (125.20M) provides weak coverage of capital expenditures of 801.15M, with a -0.16 ratio suggesting additional external financing needs for growth initiatives.
  • Operating earnings of 827.57M show weak coverage of depreciation charges of 357.57M, with a 2.31 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of (125.20M) represents just 0.18x of debt issuance (700.56M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Segments Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

Peer comparison

Companies in the Utilities - Regulated Gas
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ATO Atmos Energy Corp 28.99 Bn 23.20 5.95 9.63 Bn
2 NI Nisource Inc. 14.62 Bn 27.48 3.16 16.21 Bn
3 UGI Ugi Corp /Pa/ 8.33 Bn 13.88 1.13 7.21 Bn
4 NJR New Jersey Resources Corp 5.43 Bn 16.61 2.52 3.97 Bn
5 BKH Black Hills Corp /Sd/ 5.38 Bn 18.44 2.33 4.70 Bn
6 SR Spire Inc 5.36 Bn 19.83 2.09 5.35 Bn
7 SWX Southwest Gas Holdings, Inc. 5.04 Bn 19.06 1.48 3.51 Bn
8 OGS ONE Gas, Inc. 4.50 Bn 29.67 3.07 3.40 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.78 0.79
EV to Cash from Ops. EV/CFO 31.78 18.36
EV to Debt EV to Debt 2.29 1.86
EV to EBIT EV/EBIT 18.31 -126.33
EV to EBITDA EV/EBITDA 10.24 11.96
EV to Free Cash Flow [EV/FCF] EV/FCF -16.45 -73.99
EV to Market Cap EV to Market Cap 1.59 1.71
EV to Revenue EV/Rev 2.35 3.19
Price to Book Value [P/B] P/B 1.77 2.59
Price to Earnings [P/E] P/E 19.06 77.08
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.60 1.42
Dividend Payout Ratio % Div Payout % (Qtr) 38.50 47.06
Dividend per Basic Share Div per Share (Qtr) 2.48 1.78
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) -143.02 54.25
Interest Coverage Int. cover (Qtr) 3.10 3.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 3.51 -16.87
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 70.51 44.73
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 -0.03
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 62.66 6.88
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 19.14 113.90
EBIT Growth (1y) % EBIT 1y % (Qtr) 74.20 26.96
EBT Growth (1y) % EBT 1y % (Qtr) 177.19 12.44
EPS Growth (1y) % EPS 1y % (Qtr) 157.60 24.35
FCF Growth (1y) % FCF 1y % (Qtr) -119.72 -146.22
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 17.46 10.16
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.39 0.36
Cash Payout Ratio Cash Payout (Qtr) 0.12 0.12
Cash Ratio Cash Ratio (Qtr) 0.97 0.15
Current Ratio Curr Ratio (Qtr) 1.55 0.94
Debt to Equity Ratio Debt/Equity (Qtr) 0.89 3.58
Interest Cover Ratio Int Coverage (Qtr) 3.10 3.17
Times Interest Earned Times Interest Earned (Qtr) 3.10 3.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 29.60 32.74
EBIT Margin % EBIT Margin % (Qtr) 20.67 21.43
EBT Margin % EBT Margin % (Qtr) 14.00 13.06
Gross Margin % Gross Margin % (Qtr) 23.50 43.32
Net Profit Margin % Net Margin % (Qtr) 11.60 9.98