Tag: Stock Market

NextEra Energy: An In-Depth Stock Analysis of one of the Leading Renewable Energy Providers in the U.S.

On March 20, 2025

Introduction to the Company

NextEra Energy, Inc. is one of the largest energy companies in the United States and a global leader in renewable energy. With a strong commitment to sustainability and innovation, NextEra Energy has positioned itself as a key player in the transition toward cleaner energy solutions. The company primarily focuses on generating electricity through renewable sources while maintaining reliability and affordability for millions of customers.

Illustration 1: NextEra Energy logo, symbolizing renewable energy with use of green colour and leaf like wave.

History and Background

NextEra Energy traces its origins back to 1925, when it was founded as Florida Power & Light Company (FPL). Over the years, the company expanded its operations and evolved into a diversified energy powerhouse. In 1984, FPL Group was established as the parent company, and in 2010, it was rebranded as NextEra Energy to reflect its growing emphasis on renewable energy.

Today, NextEra Energy is headquartered in Juno Beach, Florida, and has grown through strategic acquisitions and investments in wind, solar, and battery storage technologies. The company owns and operates one of the world’s largest portfolios of renewable energy assets, making it a key player in the clean energy transition.

Operation and Services

NextEra Energy serves a vast customer base across 49 states in the U.S. and four Canadian provinces. The company operates through two major business segments:

Florida Power & Light Company (FPL) – This segment focuses on electricity generation, transmission, and distribution in Florida. It is the backbone of the company’s regulated electric utility business, serving over 5.8 million customer accounts

NextEra Energy Resources – This segment handles renewable energy generation, including wind, solar, and battery storage projects. It also manages natural gas pipelines and nuclear power plants, ensuring that NextEra Energy is a key player in the transition toward cleaner energy sources

As can be seen from illustration two, the majority of NextEra’s energy generation comes from wind and solar power.

Illustration 2: The generation allocation of NextEra Energy

Wind Energy makes up 67% of its generation while solar makes up 13%. NextEra Enegy is as such a fanatstic company to invest in for those that want to be exposed to the renewable energy market.

The company is also invested in nuclear energy, constituiting 11% of its total energy generation, while only a minor part of the business constituting 6% is part of the Natural gas market.

Challenges and Controversies

Environmental Concerns: Despite its significant investments in renewable energy, NextEra Energy has faced criticism for its environmental impact. The company has been involved in disputes over the development of certain projects that environmental groups claim disrupt ecosystems and communities. Additionally, the capital-intensive nature of renewable energy projects has raised concerns about the sustainability of its financial practices

Regulatory and Legal Issues: Operating in a highly regulated industry, NextEra Energy has encountered various regulatory and legal challenges. These include disputes over rate adjustments, infrastructure expansion, and compliance with federal and state environmental laws. The company has also been involved in legal battles to block competing energy projects, which has drawn scrutiny and criticism

Competition

NextEra Energy operates in a highly competitive landscape, facing significant competition from other major utility and renewable energy companies. Some of its main competitors include: Southern Company (SO), Duke Energy (DUK), Entergy (ETR9, PPL Corporation (PPL), FirstEnergy (FE), Eversource Energy (ES), Edison International (EIX), Pinnacle West Capital (PNW), OGE Energy (OGE), and IDACORP (IDA).

These companies are all part of the electric utilities industry and compete with NextEra Energy in various aspects, including market share, technological advancements, and regulatory compliance.

NextEra Energy stands out from its competitors by being the world’s largest generator of wind and solar power, leading the transition to a low-carbon future. Its size and expertise gives it a competitive advantage. The investments the company has made in getting more advanced technologies to enhance efficiency and reduce costs, also solidifies their competitive edge.

However, the highly competitive environment in which they operate is a factor that investors should carefully consider, as it could pose potential risks.

Future outlook

Several factors will shape NextEra Energy’s future:

Expansion of Offshore Wind: NextEra Energy’s offshore wind projects will play a critical role in achieving clean energy goals. As more offshore wind projects receive government backing, NextEra stands to benefit from regulatory support and technological advancements.

Electrification of Transportation: As electric vehicle (EV) adoption grows, NextEra Energy is investing in EV infrastructure, including charging stations and grid upgrades to accommodate increased demand.

Advancements in Energy Storage: The development of more efficient and cost-effective battery storage solutions will be crucial for integrating intermittent renewable energy sources like solar and wind.

Stock Analysis

In this section, we will analyze NextEra Energy stock to determine if it is a good investment. Our philosophy is value investing, which means we seek high-quality companies that are undervalued. However, we will provide a comprehensive overview so that investors with different philosophies can evaluate the stock for themselves.

Revenue and Profits

To assess a company’s value and investment potential, revenue and profits are the logical starting points for analysis. A stock represents an actual business, much like the small businesses in your hometown. If someone offered to sell you their company, your first question would likely be about its earnings. The same principle applies when evaluating a publicly traded company—understanding its financial performance is essential before deciding to invest.

Illustration 2 and 3: Revenue of NextEra Energy from 2009 to 2024.

As seen in Illustrations 2 and 3, NextEra Energy’s revenue has shown a long-term growth, particularly in recent years. This expansion is driven by increasing demand for renewable energy, investments in infrastructure, and the company’s leadership in wind and solar power generation. Additionally, supportive government policies, tax incentives, and commitments to clean energy continue to drive sales, positioning NextEra Energy for sustained growth.

However, despite this overall upward trend, NextEra Energy’s revenue growth has experienced fluctuations. As shown in Illustrations 2 and 3, there have been periods where revenue declined due to factors such as regulatory changes, shifts in energy prices, and project timing. The utility and renewable energy sectors are subject to policy adjustments and market dynamics that can impact earnings, making it essential for investors to consider these risks. It is especially important to note that the Trump administration is opposed to the Wind sector which stands for the majority of NextEra’s energy generation.

Even with occasional volatility, the long-term outlook remains strong. With the increasing global transition to renewable energy, NextEra Energy is well-positioned to capitalize on this shift. Its investments in clean energy infrastructure, expansion into emerging markets, and strong operational efficiency suggest a promising future despite short-term revenue fluctuations. However, it has a lot of competitors and the current US administration is not as supportive of renewable energy as previous administrations.

Illustration 4 and 5: Net Income of NextEra Energy from 2009 to 2025

Net income is a crucial metric to evaluate when determining whether a company is a worthwhile investment. It represents a company’s net profit or loss after accounting for all revenues, income items, and expenses, calculated as Net Income = Revenue – Expenses.

As illustrated in Figures 4 and 5, NextEra Energy has experienced significant net income growth over the long term, particularly in recent years. For instance, the company’s net income rose from $3.573 billion in 2021 to $4.147 billion in 2022, marking a 16.06% increase. This upward trend continued in 2023, with net income reaching $7.31 billion—a substantial 76.27% increase from the previous year. This growth is driven by rising global demand for renewable energy, strategic investments in wind and solar projects, and expansion into energy storage and infrastructure development. Additionally, favorable government policies and commitments to clean energy continue to fuel revenue, positioning the company for sustained growth.

However, despite this overall upward trend, NextEra Energy’s net income has experienced fluctuations. In 2024, the company’s net income decreased by approximately 8.79% to $6.952 billion, down from $7.31 billion in 2023. This decline is partly due to increased costs impacting its renewables segment and higher operating expenses. And ofcoursw it had a sharp fall from 2018 to 2020. For investors, this inconsistency raises concerns, as it suggests that NextEra Energy may not deliver steady net income growth year after year, making it a potentially riskier investment compared to companies with more predictable financial performance. Even though net income growth has been inconsistent, the long-term trend remains upward. Considering the rising global demand for energy, the increasing popularity of renewable power, and the momentum of the green energy transition, NextEra Energy is well-positioned for future growth. These factors, combined with the company’s expanding project backlog and strategic partnerships, suggest a promising outlook despite short-term volatility.

Revenue breakdown

Illustration 6: Revenue Breakdown for NextEra Energy, gathered from gurufocus as of NOV 31, 2023.

As can be seen in Illustration 6, the majority of NextEra Energy’s revenue comes from Florida Power & Light Company, but a significant portion (17.8%) is generated by NextEra Energy Resources LLC. This diversification provides investors with exposure to both clean energy growth and the stability of a traditional utility business. Despite cost of goods sold (COGS) consuming a substantial share of its revenue, the company continues to have a significant and good amount of revenue. Additionally, high capital expenditures for clean energy development and grid modernization impact profitability. While NextEra Energy benefits from a strong market position and steady utility revenue, these costs could affect its long-term earnings growth, making it an important factor for investors to consider.

Earnings per shar (EPS)

Earnings Per Share (EPS) is a key financial metric that measures a company’s profitability on a per-share basis. It indicates how much profit a company generates for each outstanding share of its stock, and is used o assess a company’s financial health, profitability, and potential for growth. In other words this metric can tell us how profitable the business is.

Illustration 7: Earnings per share for NextEra Energy from 2009 to 2025

The EPS figure itself isn’t the primary focus for value investors—it can be 0.2 or 10, but what truly matters is the company’s ability to generate consistent earnings growth. A steadily increasing EPS over time signals strong financial health, profitability, and long-term value creation.

The EPS for NextEra Energy has had a generally positive upward trend since 2009. However, it experienced a dramatic fall from 2019 to 2020 due to the economic downturn and market disruptions caused by the COVID-19 pandemic, along with increased costs and project delays. This decline can be a red flag for investors, as it highlights the company’s sensitivity to external economic factors and potential volatility in earnings. However, after the fall, the trend has resumed its upward trajectory, supported by strong investments in renewable energy, stable utility revenue from Florida Power & Light, and favorable industry policies. As a result, the EPS has now returned to pre-fall levels, reinforcing NextEra Energy’s resilience and long-term growth potential. The pandemic can also be considered a one-time event, and the fall in 2024 due to rising interest rates and increased costs in the renewables sector can also be seen as a temporary setback rather than a long-term structural issue. Given NextEra Energy’s strong track record of recovery and consistent long-term growth, these fluctuations are likely part of normal business cycles rather than a sign of fundamental weakness.

Assets and Liabilities

Illustration 8 and 9: Assets and liabilities for NextEra Energy from 2009 to 2023

When evaluating a company as a potential investment, understanding its assets and liabilities is crucial. If a local business owner offered to sell their shop to you, one of the first questions—after determining its profitability—would be about its equity and assets. The same principle applies when assessing publicly traded companies like Dominion Energy.

As shown in Illustration 8, NextEra Energy’s total assets reached $177.5 billion in 2023, a strong figure that highlights the company’s financial growth. Additionally, NextEra Energy’s asset base has consistently expanded year over year, increasing from $48.5 billion in 2009 to $177.5 billion in 2023. This steady asset growth is a positive indicator of the company’s ongoing expansion, investments in innovative technologies, and strengthened market position. A continuously growing asset base often signifies a company’s ability to scale operations, acquire new projects, and enhance production capacity which is particularly important in the highly competitive renewable energy industry.

At the same time, NextEra’s total liabilities have also increased significantly, rising from $35.5 billion in 2009 to $119.7 billion in 2023. While such a sharp increase in debt might raise concerns for some investors, it is not necessarily a red flag given the nature of the renewable energy business. Utility companies typically operate in a capital-intensive environment where they must secure substantial financing to fund large-scale projects, develop infrastructure, and maintain their competitive edge. Debt financing is often necessary for expanding wind farm and other types of energy production, all of which contribute to long-term growth.

The key factor for investors is whether NextEra can effectively manage its debt while maintaining strong revenue and profitability. If the company can generate consistent cash flow and sustain high demand for its products and services, its rising liabilities may not be a major issue. However, if debt levels continue to grow faster than revenue or profits, it could indicate financial strain, making it important for investors to monitor the company’s ability to service its obligations while maintaining profitability.

The cash on hand for NextEra is a red flag for potential investors, as the company has $2.7 billion in readily available cash as of 2023. This amount is relatively low compared to its liabilities, which could indicate liquidity concerns and a reliance on external financing to meet obligations and fund growth.

Additionally, NextEra’s long-term debt of $61.4 billion in 2023 is significantly higher than its available cash, which is a red flag for investors. This indicates that the company relies heavily on debt financing, which could pose risks if interest rates rise or if cash flow weakens, potentially impacting its ability to meet financial obligations and sustain growth.

As seen in Illustration 9, Total Shareholder Equity—calculated as total assets minus total liabilities—has consistently grown over the past 14 years. This is a very positive indicator for potential investors, as it suggests that NextEra is building value over time rather than eroding its financial foundation. A steadily increasing shareholder equity indicates that the company’s assets are growing at a faster rate than its liabilities, which is a green flag for financial health. This trend suggests that NextEra is successfully expanding its operations while maintaining a solid balance sheet. Additionally, rising equity provides a buffer against financial downturns, making the company more resilient in times of economic uncertainty. However, investors should also consider how this growth is achieved—whether through profitable operations or increased debt financing—to fully assess the sustainability of this trend.

Debt to Equity Ratio

Illustration 10 and 11: Debt to equity for NextEra Energy from 2009 to 2023

The Debt-to-Equity (D/E) ratio is an important financial metric for assessing Next Era’s financial leverage and risk. It compares the amount of debt the company uses to finance its operations relative to its shareholder equity. A high D/E ratio suggests that the company relies more heavily on debt to fuel growth, which could increase financial risk, especially during economic downturns when managing debt obligations becomes more challenging. In contrast, a lower D/E ratio indicates that Next Era is primarily financed through equity, reducing financial risk but potentially limiting its ability to rapidly expand.

The D/E ratio of NextEra Energy has been on a downward trend from around 2.8 in 2009–2010 to 2.05 in 2024. This is a positive sign for investors since it indicates that the company is gradually reducing its reliance on debt relative to equity. A lower D/E ratio suggests improved financial stability, reduced risk of overleveraging, and a stronger ability to manage long-term obligations while continuing to invest in growth.

Legendary value-investor Warren Buffett prefers a D/E ratio of below 0.5. Compared to 0.5, NextEra is still at a very high level. However, this is normal for companies in the renewable utility industry since they often require significant capital investment to fund large-scale projects, develop infrastructure, and expand renewable energy capacity. While NextEra’s D/E ratio is higher than Buffett’s preferred level, it reflects the capital-intensive nature of the energy sector and the company’s ongoing efforts to scale its operations and meet growing demand for clean energy.

Price to earnings ratio (P/E)

Illustration 12 and 13: Price to earnings ratio for NextEra Energy from 2009 to 2023

For value investors, one of the most critical metrics when evaluating NextEra’s stock is the price-to-earnings (P/E) ratio, as it helps assess whether the company is undervalued or overvalued. Even if a company has strong financials, purchasing its stock at a high price can lead to poor returns. For example, imagine a business generating solid profits of $1 million per year. If the owner offers to sell you the business for just $1, it would be an incredible deal. But if the owner asks for $1 trillion, even though the business is profitable, the price would be absurdly overvalued. The stock market works similarly—companies can be priced cheaply on some days and excessively expensive on others.

Warren Buffett, a legendary value investor, typically considers stocks with a P/E ratio of 15 or lower as “bargains.” A high P/E ratio suggests that investors are paying a premium for the company’s earnings, expecting significant growth. However, this also indicates that the stock is expensive relative to its earnings, which can be a red flag for value investors. NextEra’s P/E ratio has been on a relatively stable level from 2010 to 2018. From 2018 as renewable stocks became popular on the stock market its P/E skyrocket to a high of 107.21 in 2022 which is strongly overprices. Before the bubble burst and it came back to 17.19 in 2024.

The mania for renewable energy stocks seems to have slowed down after the bubble burst in 2022. For potential investors, the P/E of 20.2 in 2025 seems fairly priced, meaning that you will not be buying at a bargain but also not overpaying for the stock. If you believe in the company’s future earnings potential and strong fundamentals, it could be a good time to enter at a reasonable valuation and hold for long-term growth.

Dividend

Illustration 14: NextEra Energy’s dividend yield and dividend payout from 1995 to 2025

NextEra Energy stands out among renewable energy companies by offering a consistent dividend, making it an attractive option for income-focused investors. In 2025, NextEra’s annual dividend is $1.55 per share, reflecting its commitment to returning value to shareholders. Additionally, the company has a strong track record of increasing its dividend, with a five-year annualized growth rate of approximately 10%, demonstrating steady financial health and shareholder rewards.

NextEra Energy has demonstrated remarkable consistency in its dividend payments, making it a reliable choice for income-focused investors. The company has increased its dividend for over 25 consecutive years, reflecting strong earnings growth and disciplined financial management. Even during economic downturns and market volatility, NextEra has continued to raise its payouts, reinforcing its commitment to returning value to shareholders. This level of consistency is a positive sign, as it indicates that the company generates stable cash flows and prioritizes rewarding long-term investors while continuing to invest in its renewable energy expansion. However, as can be seen in illustration 14, despite the dividend payout increasing, the dividend yield has been on a steady decline.

While NextEra’s dividend yield of around 2.2% (as of 2025) may not be the highest in the utility sector, it remains a reliable source of income, especially when combined with the company’s long-term growth prospects in renewable energy. For investors seeking a mix of dividend income and exposure to clean energy, NextEra presents a compelling case. However, given its high debt levels and capital-intensive business model, investors should monitor whether the company can sustain its dividend growth while continuing to invest in future expansion.

To summarize:

✅ Green Flag:

Consistent Dividend Growth: NextEra has a strong history of dividend increases, making it a solid choice for income investors.
Balanced Strategy: The company provides both income and long-term growth potential, appealing to a broad range of investors.

🚩 Red Flag:

Debt Reliance: Maintaining dividends alongside significant capital expenditures requires careful financial management.
Moderate Yield: While NextEra pays dividends, its yield is lower than some traditional utility stocks.

Insider Trading

Illustration 14: Recent Insider Selling for NextEra Energy

A crucial metric to consider when evaluating whether a company is worth investing in is insider trading activity—specifically, whether company insiders have been buying or selling shares over the past year. It’s particularly important to assess who has been trading, as directors should be monitored even more closely than officers.

As can be seen from the table above, there has been no selling by any mayor insiders recently. The insiders who have been selling stock has been lower level officers and directors of subsidiaries. This is a green flag for investors since it shows that insiders are confident in the company as they have not sold their shares.

Other Company Info

As illustrated below, NextEra Energy currently employs approximately 16,800 individuals, reflecting a steady increase from 14,900 employees in 2020. The company was originally founded in 1925 as Florida Power & Light Company and later rebranded as NextEra Energy in 2010 to reflect its expansion into renewable energy. It is publicly traded on the New York Stock Exchange under the ticker symbol NEE. Operating within the Utilities sector, NextEra Energy is classified under the Electric Utilities industry. The company has approximately 2.06 billion shares outstanding and a market capitalization of around $120 billion USD as of 2024.

Headquartered at 700 Universe Boulevard, Juno Beach, Florida 33408, United States, NextEra Energy’s official website is www.nexteraenergy.com.

Illustration 15-17: : Number of employees at NextEra Energy and its location in Juno Beach, Florida.

Final Verdict

NextEra Energy offers a compelling opportunity for investors seeking exposure to renewable energy, particularly wind and solar power, as well as energy storage solutions. The company has secured significant contracts with major corporations like Google and Walmart and continues to expand its clean energy initiatives. With a strong focus on sustainability and innovation, NextEra is well-positioned to capitalize on the increasing demand for carbon-free energy and play a leading role in the transition to a greener economy.

However, while NextEra Energy has experienced strong growth, there are some concerns related to its financial performance. Despite increasing revenue, high capital expenditures and significant debt levels to fund its renewable energy projects have put pressure on profitability. Additionally, the company’s cost of sales (COGS) remains substantial, impacting margins. While NextEra has maintained a stable dividend and solid market position, its reliance on debt and ongoing capital investment may raise concerns for some investors.

That said, it is important to note that NextEra Energy is a leader in the renewable energy space and is poised for long-term growth given the ongoing expansion of clean energy infrastructure. For growth-oriented investors who believe in the future of renewable energy and are willing to accept potential short-term financial volatility, NextEra presents a strong investment opportunity. However, for more conservative investors seeking a company with consistent profitability and low financial risk, NextEra Energy may not be the ideal choice.

NextEra Energy: An In-Depth Stock Analysis of one of the Leading Renewable Energy Providers in the U.S.

By DaveRobinson

On March 20, 2025

In Utility Stocks

Introduction to the Company

Illustration 1: NextEra Energy logo, symbolizing renewable energy with use of green colour and leaf like wave.

History and Background

Operation and Services

NextEra Energy serves a vast customer base across 49 states in the U.S. and four Canadian provinces. The company operates through two major business segments:

As can be seen from illustration two, the majority of NextEra’s energy generation comes from wind and solar power.

Illustration 2: The generation allocation of NextEra Energy

Wind Energy makes up 67% of its generation while solar makes up 13%. NextEra Enegy is as such a fanatstic company to invest in for those that want to be exposed to the renewable energy market.

The company is also invested in nuclear energy, constituiting 11% of its total energy generation, while only a minor part of the business constituting 6% is part of the Natural gas market.

Challenges and Controversies

Competition

These companies are all part of the electric utilities industry and compete with NextEra Energy in various aspects, including market share, technological advancements, and regulatory compliance.

However, the highly competitive environment in which they operate is a factor that investors should carefully consider, as it could pose potential risks.

Future outlook

Several factors will shape NextEra Energy’s future:

Stock Analysis

Revenue and Profits

Illustration 2 and 3: Revenue of NextEra Energy from 2009 to 2024.

Illustration 4 and 5: Net Income of NextEra Energy from 2009 to 2025

Revenue breakdown

Illustration 6: Revenue Breakdown for NextEra Energy, gathered from gurufocus as of NOV 31, 2023.

Earnings per shar (EPS)

Illustration 7: Earnings per share for NextEra Energy from 2009 to 2025

Assets and Liabilities

Illustration 8 and 9: Assets and liabilities for NextEra Energy from 2009 to 2023

Debt to Equity Ratio

Illustration 10 and 11: Debt to equity for NextEra Energy from 2009 to 2023

Price to earnings ratio (P/E)

Illustration 12 and 13: Price to earnings ratio for NextEra Energy from 2009 to 2023

Illustration 14: NextEra Energy’s dividend yield and dividend payout from 1995 to 2025

To summarize:

✅ Green Flag:

Consistent Dividend Growth: NextEra has a strong history of dividend increases, making it a solid choice for income investors.
Balanced Strategy: The company provides both income and long-term growth potential, appealing to a broad range of investors.

🚩 Red Flag:

Debt Reliance: Maintaining dividends alongside significant capital expenditures requires careful financial management.
Moderate Yield: While NextEra pays dividends, its yield is lower than some traditional utility stocks.

Insider Trading

Illustration 14: Recent Insider Selling for NextEra Energy

Other Company Info

Headquartered at 700 Universe Boulevard, Juno Beach, Florida 33408, United States, NextEra Energy’s official website is www.nexteraenergy.com.

Illustration 15-17: : Number of employees at NextEra Energy and its location in Juno Beach, Florida.

Final Verdict

Canadian Solar: A comprehensive overview and stock analysis of one of the leading Solar Companies

By PR. Writer

On February 16, 2025

In Ukategorisert

Introduction

Canadian Solar Inc. is one of the largest and most established solar energy companies in the world. It has made significant contributions to the global transition toward renewable energy, specifically solar power. With a presence in over 20 countries, Canadian Solar has successfully integrated itself into both the manufacturing of solar photovoltaic (PV) products and the development of solar projects. In this article, we will explore the history, operations, competitive positioning, financials, the future prospects of Canadian Solar and of course make a comprehensive analysis of the stock of Canadian Solar.

History and Founding

Canadian Solar was founded in 2001 by Dr. Shawn Qu, a former University of Toronto researcher with a background in electrical engineering. Dr. Qu, originally from China, started the company in Ontario, Canada, with the goal of providing high-performance solar modules at competitive prices. The company’s initial focus was on manufacturing solar cells and modules, and its breakthrough came with its focus on high efficiency and the development of advanced technologies in the solar industry.

The decision to base the company in Canada was a strategic move, given the country’s growing interest in clean energy and environmental sustainability. However, Canadian Solar’s roots were international, as Dr. Qu leveraged relationships in China for access to affordable manufacturing resources. The company quickly expanded from its Canadian base and set up large-scale manufacturing operations in China, where it remains one of the leading solar module manufacturers today.

Canadian Solar’s commitment to innovation and sustainability has allowed it to grow from a small, niche manufacturer to a global leader in solar energy. The company’s products are now used in residential, commercial, and utility-scale solar projects around the world, making Canadian Solar a key player in the global energy transition.

Canadian Solar Energy Solutions - Energy Partners

Illustration 1: Canadian Solar logo with sun and rays symbolizing commitment to solar power.

Operations and Products

Canadian Solar operates in two major segments: Solar Module Manufacturing and Solar Power Projects.

Solar Module Manufacturing Canadian Solar produces a wide range of photovoltaic (PV) products, including solar modules, inverters, and energy storage systems. Their solar panels are among the most efficient on the market, with varying products designed for different types of consumers, ranging from residential to large-scale commercial and utility installations. The company uses advanced technology such as PERC (Passivated Emitter and Rear Cell) to ensure high efficiency and durability of their modules.

Solar Power Projects Beyond manufacturing, Canadian Solar is actively involved in the development, financing, and operation of solar power projects globally. This segment includes utility-scale solar farms, distributed solar energy systems for commercial and industrial clients, and energy storage solutions.

Canadian Solar has completed over 10 GW of solar projects worldwide, cementing its position as a leading solar energy provider. The company focuses on end-to-end solar solutions, offering customers everything from project development to system integration, operation, and maintenance.

In addition to these, Canadian Solar has made significant strides in the energy storage market. As the world shifts towards renewable energy, energy storage solutions are seen as a key enabler for balancing intermittent power generation from solar and wind energy. Canadian Solar’s energy storage division, which works in tandem with their solar projects, provides customers with grid-independent solutions that help store excess energy for later use.

Revenue Breakdown

The revenue breakdown of Canadian Solar is as follows:

1. Solar Module Manufacturing: This segment represents the largest portion of Canadian Solar’s revenue, contributing approximately 60-70%. The company’s solar modules are sold to both residential and commercial customers and are used in utility-scale projects. This portion of the business continues to grow as demand for solar energy increases globally, driven by favorable government policies, falling solar costs, and rising environmental concerns.

2. Solar Power Projects: The company’s solar power projects segment accounts for around 25-35% of its revenue. This portion includes the sale of solar power plants, as well as ongoing income generated from the operation of these plants. Over the years, Canadian Solar has managed to increase its share of revenue from projects, reflecting the growing demand for large-scale solar farms and distributed generation systems.

3. Energy Storage and Other Products: Although a smaller segment, energy storage systems and other ancillary products are becoming an increasingly important part of Canadian Solar’s portfolio. This segment contributes roughly 5-10% of the company’s total revenue.

The Most Recent Developments In Energy Storage Technology

Illustration 2: Energy Storage is quickly becoming a growing sector for Canadian Solar.

Canadian Solar has also been successful in managing costs and improving operational efficiency. The company’s gross margin has steadily improved due to its focus on high-efficiency products and scaling its manufacturing operations.

Key Competitors

Canadian Solar operates in a very highly competitive market. Its key competitors include:

First Solar (FSLR): A US-based solar energy company, First Solar is one of the leading manufacturers of thin-film solar modules. Unlike Canadian Solar, which primarily produces crystalline silicon modules, First Solar specializes in cadmium telluride (CdTe) technology. First Solar is known for its utility-scale solar projects, similar to Canadian Solar’s project development segment.

JinkoSolar (JKS): Another Chinese solar giant, JinkoSolar is one of the largest manufacturers of solar panels globally. JinkoSolar’s strength lies in its focus on technology, with an emphasis on increasing panel efficiency and reducing costs. The company’s global footprint is comparable to Canadian Solar’s, and its competitive pricing makes it a formidable rival.
Trina Solar (TSL): Trina Solar is another major Chinese player in the solar market. Like Canadian Solar, it operates in both module manufacturing and project development. Trina Solar has a strong presence in Europe, the Americas, and Asia.
LONGi Green Energy (601012.SS): LONGi is one of the largest manufacturers of monocrystalline silicon solar products. With a focus on technology and efficiency, LONGi competes directly with Canadian Solar in the module manufacturing market.
SunPower (SPWR): Based in the United States, SunPower is a major player in both residential and commercial solar installations. SunPower differentiates itself by offering premium solar products, while Canadian Solar offers a broader range of modules for different market segments.

To sum up, the solar power market is highly competitive with many competitors to challenge Canadian Solar.

Market Position and Competitive Advantages

Despite very high competion Canadian Solar holds a competitive edge in several areas:

Global Reach: With manufacturing facilities in China, Canada, and other parts of the world, Canadian Solar has a robust global supply chain and can cater to customers in diverse markets. Its presence in the Americas, Europe, and Asia ensures that it remains competitive in the global solar market.

Innovation and Technology: Canadian Solar places a strong emphasis on research and development (R&D). The company consistently strives to improve the efficiency and durability of its solar panels, which has helped it maintain its competitive edge. Canadian Solar is at the forefront of solar cell and panel technology, incorporating advanced technologies like PERC and bifacial modules.

Reproducing scientific studies: A Good Housekeeping Seal of Approval

Illustration 3: Canadian Solar’s is well known for being invested in research and development.

Cost Leadership: One of the key drivers behind Canadian Solar’s success is its ability to maintain a competitive price point while offering high-quality products. By leveraging economies of scale and low-cost manufacturing in China, Canadian Solar can keep its prices lower than many competitors while maintaining margins.

Comprehensive Solutions: Unlike some competitors that focus primarily on module manufacturing, Canadian Solar offers a comprehensive solution, including project development and energy storage. This ability to offer turnkey solutions, from manufacturing to operation and maintenance, is a significant advantage in attracting large-scale customers.

Future Outlook

Looking ahead, Canadian Solar is well-positioned to continue its growth. The global transition to renewable energy is accelerating, with solar energy at the forefront. The company’s strong brand, technological innovation, and global footprint provide a solid foundation for its future growth. Canadian Solar is also well-positioned to benefit from government incentives and policies aimed at promoting renewable energy adoption.

With increasing demand for solar energy, growing interest in energy storage, and continued advancements in panel technology, Canadian Solar is expected to remain a leader in the solar industry.

Furthermore, the company’s expansion into emerging markets like India, Africa, and Latin America presents significant growth opportunities.

Stock Analysis

In this section we will analyze Canadian Solar’s stock to see if it is a good stock to buy or not. Our philosophy is value investing meaning that we try to find good quality companies that are undervalued. However, we will give a holistic overview so all kind of investors with different philosophies can judge the stock for themselves.

Revenue and Profits

To determine a company’s worth and if it is worth investing in, the company’s revenue and profits are a natural starting point to analyze. It should never bee forgotten that a stock represents a company just like the small businesses in your home town. If someone asked you if you want to buy their company, the first question would naturally be how much the company makes and the same question when trying to analyze if a company registered in the stock exchange is worth buying.

Illustration 4 and 5: Revenue of Canadian Solar from 2009 to 2023.

As seen in Illustrations 4 and 5, Canadian Solar’s revenue has been increasing over the long term, particularly in recent years. This growth is driven by rising global demand for solar energy, increased module shipments, and expansion into energy storage and project development. Additionally, favorable government policies and renewable energy commitments continue to fuel sales, positioning the company for sustained growth.

However, despite this overall upward trend, Canadian Solar’s revenue growth has been inconsistent. As shown in Illustrations 4 and 5, there have been years—such as 2012, 2016, and 2019—where revenue declined. This volatility is partly due to intense competition in the solar industry, fluctuating market conditions, and policy shifts affecting demand. For investors, this inconsistency raises concerns, as it suggests that Canadian Solar may not deliver steady revenue growth year after year, making it a potentially riskier investment compared to companies with more predictable financial performance.

Even though revenue growth has been inconsistent, the long-term trend remains upward. Considering the rising global demand for energy, the increasing popularity of solar power, and the momentum of the green energy transition, Canadian Solar is well-positioned for future growth. These factors, combined with the company’s expanding product offerings and global presence, suggest a promising outlook despite short-term volatility.

Illustration 6 and 7: Net Income of Canadian Solar from 2009 to 2023.

As seen in Illustrations 6 and 7, Canadian Solar’s net profit has shown a slight upward trend but has mostly remained relatively flat with fluctuations since 2014, peaking around 250. This inconsistency is a red flag for potential investors, as it indicates that despite growing revenue, the company has struggled to achieve steady profit growth. Factors such as pricing pressure, industry competition, and fluctuating costs may be limiting profitability, making it difficult for investors to rely on sustained earnings growth. When investing in a company, increasing profits is one of the most—if not the most—important factors for investors. However, Canadian Solar has struggled to achieve consistent profitability, as its net income has remained relatively stable over the years despite growing revenue. This lack of sustained profit growth raises concerns about the company’s ability to improve margins and generate higher returns for shareholders in the long run.

Revenue breakdown

Illustration 8: Revenue Breakdown for Canadian Solar

As seen in Illustration 8, Canadian Solar is a pure-play solar energy company, generating all its revenue from the solar industry. This makes it an ideal investment opportunity for those seeking direct exposure to the solar sector. However, for investors looking for diversification within the broader utility sector, Canadian Solar may not be the best fit, as it lacks revenue streams from other energy sources or utility-related businesses.

Additionally, Illustration 8 highlights that the cost of sales in the solar energy industry is significantly high, which consumes a large portion of Canadian Solar’s revenue. On top of that, the company allocates substantial funds toward R&D, administration, and marketing, further limiting its net profit. As a result, despite strong revenue figures, the company’s actual profitability remains relatively low, which could be a concern for investors focused on earnings growth.

Earnings per shar (EPS)

Illustration 9: Earnings per share for Canadian Solar from 2009 to 2023.

Canadian Solar’s earnings per share (EPS) performance from 2009 to 2023 presents a mixed picture for investors. While the company has demonstrated resilience and growth in revenue over the long term, its EPS has been highly volatile, with significant fluctuations rather than a consistent upward trend. Periods of strong earnings, such as in 2014, have been followed by years of weaker performance, making it difficult for investors to predict steady profit growth. This inconsistency can be a red flag for long-term investors who prioritize stable and growing earnings, as it suggests that Canadian Solar’s profitability is sensitive to external factors like pricing pressure, raw material costs, and government policies.

Assets and Liabilities

Illustration 10 and 11: Assets, Liabilities and Total Shareholder Equity for Canadian Solar from 2009 to 2023.

As shown in Illustrations 10 and 11, Canadian Solar has a substantial asset base, totaling $11.9 billion in 2024. This steady asset growth over time is a positive sign, indicating that the company is expanding its operations, investing in new technologies, and strengthening its market position. A growing asset base often reflects a company’s ability to scale its business, acquire new projects, and improve its production capacity, which is particularly important in the highly competitive solar energy industry.

At the same time, Canadian Solar’s total liabilities have also increased significantly, rising from $573 million in 2009 to $8.2 billion in 2024. While such a sharp increase in debt might raise concerns for some investors, it is not necessarily a red flag given the nature of the solar energy business. Solar companies typically operate in a capital-intensive environment where they must secure substantial financing to fund large-scale projects, develop infrastructure, and maintain their competitive edge. Debt financing is often necessary for expanding solar farms, increasing manufacturing capacity, and advancing energy storage solutions, all of which contribute to long-term growth.

The key factor for investors is whether Canadian Solar can effectively manage its debt while maintaining strong revenue and profitability. If the company can generate consistent cash flow and sustain high demand for its products and services, its rising liabilities may not be a major issue. However, if debt levels continue to grow faster than revenue or profits, it could indicate financial strain, making it important for investors to monitor the company’s ability to service its obligations while maintaining profitability.

The cash on hand for Canadian Solar is a green flag for potential investors, as the company has $2.9 billion in readily available cash as of 2023. This strong cash reserve provides the company with flexibility and liquidity, enabling it to navigate market fluctuations, invest in new projects, and meet its short-term financial obligations without relying heavily on external financing.

Additionally, Canadian Solar’s long-term debt of $1.65 billion in 2023 is significantly lower than its available cash, which is a positive sign for investors. This indicates that the company has a solid financial cushion and is not overly reliant on debt to fund its operations. It suggests that Canadian Solar is in a strong position to manage its liabilities, fund future growth, and weather economic downturns without significant financial strain. This balance between cash and debt is reassuring for investors, as it reflects financial stability and prudent management of resources.

As seen in Illustration 11, Total Shareholder Equity—calculated as total assets minus total liabilities—has consistently grown over the past 14 years. This is a positive indicator for potential investors, as it suggests that Canadian Solar is building value over time rather than eroding its financial foundation. A steadily increasing shareholder equity indicates that the company’s assets are growing at a faster rate than its liabilities, which is a green flag for financial health. This trend suggests that Canadian Solar is successfully expanding its operations while maintaining a solid balance sheet. Additionally, rising equity provides a buffer against financial downturns, making the company more resilient in times of economic uncertainty. However, investors should also consider how this growth is achieved—whether through profitable operations or increased debt financing—to fully assess the sustainability of this trend.

Debt to Equity Ratio

Illustration 12 and 13: The Debt to Equity ratio of Canadian Solar from 2009 to 2024.

The Debt-to-Equity (D/E) ratio is an important financial metric for assessing Canadian Solar’s financial leverage and risk. It compares the amount of debt the company uses to finance its operations relative to its shareholder equity. A high D/E ratio suggests that the company relies more heavily on debt to fuel growth, which could increase financial risk, especially during economic downturns when managing debt obligations becomes more challenging. In contrast, a lower D/E ratio indicates that Canadian Solar is primarily financed through equity, reducing financial risk but potentially limiting its ability to rapidly expand.

In recent years, Canadian Solar has maintained a relatively high D/E ratio, reflecting its reliance on both debt and equity financing to support its operations. This is typical for companies in the solar industry, as they often need to take on debt to fund large-scale projects, infrastructure, and expansion into new areas like energy storage. However, while leveraging debt is common in the sector, investors should remain cautious and monitor Canadian Solar’s ability to manage its increasing debt load. A high D/E ratio, particularly during periods of rising interest rates or market volatility, can place pressure on profitability and financial stability.

As of 2023, Canadian Solar’s D/E ratio reached nearly 6, and it was also high in 2016 and 2017, exceeding 5. While the company has made strides in reducing its debt and increasing equity over time, its D/E ratio remains substantially higher than the level recommended by investors like Warren Buffett, who prefers a ratio below 0.5. This suggests that while the company has made progress, Canadian Solar still carries a significant debt burden that investors should carefully assess to ensure it does not hinder long-term growth or financial health.

Price to earnings ratio (P/E)

Illustration 14 and 15: The price to earning ratio for Canadian Solar from 2010 to 2024. The P/E ratio was negative and/or not available for 2012 and 2013.

For value investors, one of the most critical metrics when evaluating Canadian Solar’s stock is the price-to-earnings (P/E) ratio, as it helps assess whether the company is undervalued or overvalued. Even if a company has strong financials, purchasing its stock at a high price can lead to poor returns. For example, imagine a business generating solid profits of $1 million per year. If the owner offers to sell you the business for just $1, it would be an incredible deal. But if the owner asks for $1 trillion, even though the business is profitable, the price would be absurdly overvalued. The stock market works similarly—companies can be priced cheaply on some days and excessively expensive on others.

Warren Buffett, a legendary value investor, typically considers stocks with a P/E ratio of 15 or lower as “bargains.” A high P/E ratio suggests that investors are paying a premium for the company’s earnings, expecting significant growth. However, this also indicates that the stock is expensive relative to its earnings, which can be a red flag for value investors. Canadian Solar’s P/E ratio has fluctuated widely over the years. For example, it was in bargain territory at 4.93 in 2011, before reaching a strongly overpriced level of 62.2 in 2021. However, with the current P/E ratio of 29.90 at 16 February 2025, Canadian Solar’s stock can be seen as fairly priced, meaning it is neither undervalued nor an ideal investment for value investors seeking a strong bargain.

The strongly fluctuating prices for Canadian Solar indicates that the company’s stock price is volatile relative to its earnings, and signal uncertainty in the market or changing investor expectations about future growth. For potential investors the fluctuating prices gives them the opportunity to buy the stock at bargain price, but they should be very careful not buy at the top.

Dividend

Canadian Solar does not currently offer a dividend, focusing instead on reinvesting its profits into growth initiatives, including expanding solar projects and developing energy storage solutions. This approach is common for growth-focused companies, especially in the renewable energy sector, where significant capital is needed for expansion.

While Canadian Solar doesn’t provide regular income through dividends, its strategy of reinvestment can be appealing to growth investors looking for long-term capital appreciation rather than immediate returns. However, the lack of dividends may be a red flag for income-focused investors who rely on steady income from their investments. This strategy could also limit some investor interest, especially those seeking consistent payouts.

To summarize:

✅ Green Flag:

Growth Potential: By reinvesting profits, Canadian Solar is positioning itself for long-term growth in the rapidly expanding solar and renewable energy sectors.
Capital Allocation: The company prioritizes strategic investments in projects and innovation over dividend payouts.

🚩 Red Flag:

No Dividend: The lack of dividends may deter income-seeking investors, as Canadian Solar reinvests all profits rather than distributing earnings to shareholders.

Insider Trading

A key metric to consider when evaluating Canadian Solar as an investment is insider trading activity, specifically whether company insiders have been buying or selling shares in the past year. It’s important to focus on who is making these transactions, with particular attention to directors, as their actions often provide more insight into the company’s future prospects than those of officers.

As shown in recent data, there has been no insider selling at Canadian Solar. This is a green flag for investors, as it suggests that insiders have confidence in the company’s future performance and are holding on to their shares, rather than liquidating them.

Other Company info

As of the latest data, Canadian Solar employs approximately 22,200 people, reflecting steady growth from around 8,700 employees in 2014. The company was founded in 2001 and is headquartered in Ontario, Canada. It is listed on the NASDAQ exchange under the ticker CSIQ and operates within the Solar Energy industry under the broader Renewable Energy sector. Canadian Solar currently has approximately 73.3 million shares outstanding and a market capitalization of around USD 4.58 billion.

The company’s corporate headquarters is located at 545 Speedvale Avenue West, Guelph, Ontario N1K 1E6, Canada. For more information, you can visit their official website at www.canadiansolar.com.

Illustration 16-18: Number of employees at Canadian Solar and its location in Ontario, Canada.

Canadian Solar presents a promising long-term opportunity, particularly for investors interested in the renewable energy sector. The company is making significant strides in solar energy, energy storage, and utility-scale projects, positioning itself well for the growing demand for sustainable energy solutions. However, its financial health warrants careful consideration.

Although Canadian Solar has a solid asset base, its rising debt levels and increasing liabilities each year contribute to heightened financial risk. A significant portion of its revenue is consumed by costs of goods sold and operating expenses, limiting its profitability. As a result, while Canadian Solar has shown growth, its profitability has been inconsistent, and some of its expansion plans have not met expectations.

From a value investing standpoint, Canadian Solar does not appear to be undervalued, which may make it less appealing for investors seeking stocks with strong financials available at a discount. While the company holds substantial growth potential in the renewable energy sector, it’s crucial for investors to consider the associated risks, especially given its financial structure and profitability challenges. A key concern is that despite the increase in revenue, Canadian Solar’s net profit has remained stagnant, signaling potential inefficiencies or other underlying issues that may affect future profitability. Given these factors, our recommendation is to proceed with caution. If you find our analysis valuable, consider subscribing by entering your email below.

Canadian Solar: A comprehensive overview and stock analysis of one of the leading Solar Companies

By DaveRobinson

On February 16, 2025

In Ukategorisert

Introduction

History and Founding

Illustration 1: Canadian Solar logo with sun and rays symbolizing commitment to solar power.

Operations and Products

Canadian Solar operates in two major segments: Solar Module Manufacturing and Solar Power Projects.

Revenue Breakdown

The revenue breakdown of Canadian Solar is as follows:

Illustration 2: Energy Storage is quickly becoming a growing sector for Canadian Solar.

Key Competitors

Canadian Solar operates in a very highly competitive market. Its key competitors include:

First Solar (FSLR): A US-based solar energy company, First Solar is one of the leading manufacturers of thin-film solar modules. Unlike Canadian Solar, which primarily produces crystalline silicon modules, First Solar specializes in cadmium telluride (CdTe) technology. First Solar is known for its utility-scale solar projects, similar to Canadian Solar’s project development segment.

JinkoSolar (JKS): Another Chinese solar giant, JinkoSolar is one of the largest manufacturers of solar panels globally. JinkoSolar’s strength lies in its focus on technology, with an emphasis on increasing panel efficiency and reducing costs. The company’s global footprint is comparable to Canadian Solar’s, and its competitive pricing makes it a formidable rival.
Trina Solar (TSL): Trina Solar is another major Chinese player in the solar market. Like Canadian Solar, it operates in both module manufacturing and project development. Trina Solar has a strong presence in Europe, the Americas, and Asia.
LONGi Green Energy (601012.SS): LONGi is one of the largest manufacturers of monocrystalline silicon solar products. With a focus on technology and efficiency, LONGi competes directly with Canadian Solar in the module manufacturing market.
SunPower (SPWR): Based in the United States, SunPower is a major player in both residential and commercial solar installations. SunPower differentiates itself by offering premium solar products, while Canadian Solar offers a broader range of modules for different market segments.

To sum up, the solar power market is highly competitive with many competitors to challenge Canadian Solar.

Market Position and Competitive Advantages

Despite very high competion Canadian Solar holds a competitive edge in several areas:

Illustration 3: Canadian Solar’s is well known for being invested in research and development.

Future Outlook

With increasing demand for solar energy, growing interest in energy storage, and continued advancements in panel technology, Canadian Solar is expected to remain a leader in the solar industry.

Furthermore, the company’s expansion into emerging markets like India, Africa, and Latin America presents significant growth opportunities.

Stock Analysis

Revenue and Profits

Illustration 4 and 5: Revenue of Canadian Solar from 2009 to 2023.

Illustration 6 and 7: Net Income of Canadian Solar from 2009 to 2023.

Revenue breakdown

Illustration 8: Revenue Breakdown for Canadian Solar

Earnings per shar (EPS)

Illustration 9: Earnings per share for Canadian Solar from 2009 to 2023.

Assets and Liabilities

Illustration 10 and 11: Assets, Liabilities and Total Shareholder Equity for Canadian Solar from 2009 to 2023.

Debt to Equity Ratio

Illustration 12 and 13: The Debt to Equity ratio of Canadian Solar from 2009 to 2024.

Price to earnings ratio (P/E)

Illustration 14 and 15: The price to earning ratio for Canadian Solar from 2010 to 2024. The P/E ratio was negative and/or not available for 2012 and 2013.

Warren Buffett, a legendary value investor, typically considers stocks with a P/E ratio of 15 or lower as “bargains.” A high P/E ratio suggests that investors are paying a premium for the company’s earnings, expecting significant growth. However, this also indicates that the stock is expensive relative to its earnings, which can be a red flag for value investors. Canadian Solar’s P/E ratio has fluctuated widely over the years. For example, it was in bargain territory at 4.93 in 2011, before reaching a strongly overpriced level of 62.2 in 2021. However, with the current P/E ratio of 29.90 at 16 February 2025, Canadian Solar’s stock can be seen as fairly priced, meaning it is neither undervalued nor an ideal investment for value investors seeking a strong bargain.

Dividend

To summarize:

✅ Green Flag:

Growth Potential: By reinvesting profits, Canadian Solar is positioning itself for long-term growth in the rapidly expanding solar and renewable energy sectors.
Capital Allocation: The company prioritizes strategic investments in projects and innovation over dividend payouts.

🚩 Red Flag:

No Dividend: The lack of dividends may deter income-seeking investors, as Canadian Solar reinvests all profits rather than distributing earnings to shareholders.

Insider Trading

Other Company info

The company’s corporate headquarters is located at 545 Speedvale Avenue West, Guelph, Ontario N1K 1E6, Canada. For more information, you can visit their official website at www.canadiansolar.com.

Illustration 16-18: Number of employees at Canadian Solar and its location in Ontario, Canada.

Starting your own Business vs. Investing in Stocks: Which Path to Wealth is Right for you?

By DaveRobinson

On February 15, 2025

In Ukategorisert

Introduction

The decision between starting your own business or investing in stocks is one of the most critical financial choices an individual can make. Both paths offer unique opportunities for wealth creation, but they also come with distinct risks and challenges. This article aims to explore all the possible factors to consider when choosing between entrepreneurship and stock market investing, including risk tolerance, capital availability, time commitment, skillset, personal goals, and economic conditions.

Understanding the Fundamentals

Before diving into the key factors, let’s define each option clearly:

Starting a Business involves creating and managing your own company, that offers goods or services. It requires a business idea, operational planning, marketing, and a long-term commitment to growth and management.
Investing in Self-Picked Stocks means selecting and purchasing shares of companies based on research and analysis, aiming for capital appreciation, dividends, or both. This can be everything from small penny stocks to the stocks of some of the biggest and most well established companies in the world.

Investing in stocks and starting a business both involve risk, research, and the potential for long-term wealth, but they differ in control and involvement. Investors rely on companies to grow their money, often passively, while entrepreneurs actively build and manage their businesses.

Both require patience, strategy, and the ability to handle uncertainty, but a business offers more control over success, whereas stocks provide diversification and liquidity. Ultimately, one is about owning a piece of someone else’s success, while the other is about creating your own. Each approach can lead to financial success but in very different ways. The choice depends on individual circumstances, risk appetite, and long-term objectives

1. Risk Tolerance

Starting a Business: Involves high risk, with a significant percentage of startups failing within the first few years. Risks include financial loss, market competition, operational challenges, and economic downturns.

Illustration 1: If entrepreneurship or the stock market is the best alternative depends on how much risk you are willing to take on.

The failure rate if newly started and established companies is quite high. After the first year, about 20% of new businesses fail. After 3 years: Around 45% of businesses fail (~55% survive). After 5 years: Roughly 50%–60% of businesses fail (~40%–50% survive). And after 10 years: Around 70%–90% of businesses fail.

It’s important to note that these figures only reflect business survival rates, not actual success. Among the companies that avoid bankruptcy, 80–90% remain small, with modest profits or just breaking even. Around 5–10% achieve moderate success, growing into stable mid-sized businesses, while 1–5% experience significant growth, becoming highly profitable and expanding nationally or internationally. Fewer than 0.1% reach unicorn status, with a valuation of $1 billion or more. Moderate is here defined as a company that has a net profit of USD 500 000 to USD 20 000 000.

Investing in Stocks: Stock market investments also carry risks, such as market volatility, economic downturns, and company-specific risks. However, diversified investing can help mitigate these risks.

The average person in stock investing tends to underperform the market, with individual investors typically achieving returns around 3%–5% annually, while the S&P 500 historically averages 7%–10% per year, adjusted for inflation. Many investors struggle with poor timing, often buying high and selling low, or making emotional decisions during market volatility. Active traders, trying to pick stocks or time the market, often face higher fees and taxes, which further erode returns. In contrast, those who invest passively in diversified index funds generally align more closely with the market’s long-term average returns, making it a more reliable strategy for most investors.

However, the average stock investor do get a much better return on money, on average, compared to an entrepreneur.

Illustration 2: If you are good with Uncertainty, entrepreneurship can be for you.

Key Consideration: If you have a high-risk tolerance and are comfortable with uncertainty, entrepreneurship could be a good fit. However, if you prefer more calculated risks with the option for diversification, investing in stocks might be the better route. Both options involve risk, but the right choice depends on your personal risk tolerance. Remember, the higher the risk, the greater the potential return—whether you’re choosing stocks or deciding whether to start a business.

2. Capital Requirements

Starting a Business: Starting a business requires significant upfront investment for product development, inventory, marketing, and operational costs. These initial expenses can be substantial, as you’ll need to cover everything from creating your product or service to securing a physical location or paying for website hosting. Rent, employee salaries, and advertising campaigns can also add up quickly. Many entrepreneurs underestimate the financial strain at the beginning, and without enough funding, businesses can easily fail.

You’ll need to save up enough money to cover all these costs before you even start generating income. Inventory purchases, production costs, and operational overheads are not cheap, and it’s easy to feel overwhelmed by the scale of these expenses. If you don’t have the right resources or backup funding, it can be difficult to maintain momentum during the early stages, especially if cash flow is slow. Unlike investing in stocks, which can be done with a relatively small initial capital, starting a business demands a much higher upfront commitment.

Illustration 3: Starting a Business often requires saved capital.

Investing in Stocks: Requires less capital initially. With as little as a few hundred dollars, you can start investing in stocks. While the capital required to start investing in stocks is relatively low, it’s important to remember that achieving significant returns often requires a long-term commitment and a consistent investment strategy. While you can start small, many investors opt to increase their capital gradually, taking advantage of compounding returns. However, it’s essential to be mindful of the costs involved, such as trading fees, commissions, or taxes on dividends and capital gains, which can eat into your profits.

Key Consideration: If you have substantial capital and access to funding, starting a business may be feasible. If capital is limited, stock investing offers a lower barrier to entry.

3. Time Commitment

Starting a Business: Starting a business requires full-time dedication, particularly in the early stages when the foundation is being built. Running a business demands long hours, as entrepreneurs must juggle various tasks, from product development and marketing to managing finances and customer service. It’s a constant cycle of problem-solving and adapting to unforeseen challenges, whether it’s adjusting to market changes, troubleshooting operational issues, or making tough decisions. The ability to remain flexible and resilient is crucial, as the business landscape can shift quickly and often requires entrepreneurs to pivot or refine their approach to stay competitive.

On average, entrepreneurs tend to work 8 to 12 hours a day. In the early stages of a business, this can often stretch beyond 12 hours a day, especially when the entrepreneur is handling multiple roles like marketing, customer service, and operations. As the business matures and more employees are hired, the hours may become more manageable, but many entrepreneurs still put in long days, sometimes working evenings or weekends to stay on top of tasks and ensure the business continues to grow.

Illustration 4: Starting a Business can take significant time.

Investing in Stocks: While active trading requires significant research, long-term investing can be more passive. Stock investing generally requires fewer hours per day compared to running a business. For most investors, he daily time commitment can be quite minimal. On average, investors may spend 30 minutes to an hour a day checking their portfolios, staying updated on market trends, or reviewing the performance of specific stocks.

For those actively trading or managing their investments, it could require more time, possibly 2 to 4 hours a day, particularly if they are making frequent trades or conducting in-depth research. However, stock investing doesn’t typically demand the constant attention that a business requires, and the time commitment can be adjusted based on the investor’s approach—whether it’s passive, active, or a mix of both. If you are picking your own stock, conducting fundamental analysis of all the different companies could take significant time.

Key Consideration: If you prefer flexibility and passive income, stock investing may be a better choice. If you are passionate about building something and willing to dedicate years to it, entrepreneurship might be the way to go.

4. Skillset and Expertise

Starting a Business: Starting a business requires a broad set of skills, including knowledge of business operations, finance, marketing, management, and industry-specific expertise. Entrepreneurs need to understand how to efficiently manage resources, create a profitable business model, and navigate regulatory requirements. Financial knowledge is crucial for managing cash flow, budgeting, and ensuring the business remains solvent. Additionally, marketing and management skills are essential for attracting customers and leading a team, while industry-specific knowledge helps ensure the business can compete effectively in its sector.

Investing in Stocks: Investing in stocks requires a solid understanding of financial markets, stock valuation, economic trends, and risk management. Investors need to assess a company’s financial health, understand how market forces can affect stock prices, and evaluate the potential for future growth. They must also manage risk, which involves diversifying investments and understanding how broader economic conditions can impact their portfolio. Staying informed about global and local market trends, as well as financial reports, is key to making informed investment decisions.

Illustration 5: Expertise is an important factor to take into account.

Key Consideration: f you have strong business acumen and leadership skills, running a business might be a better fit for you. Entrepreneurship allows you to directly apply your skills in management, problem-solving, and decision-making. On the other hand, if you enjoy analyzing companies, financial data, and understanding market trends, stock investing could be a better option. Both paths require a keen understanding of numbers, but the level of involvement and the type of expertise needed differ significantly.

5. Potential Returns and Scalability

Starting a Business: Starting a business can offer unlimited earnings if successful, but profits depend heavily on execution, market demand, and the scalability of the business model.

Investing in Stocks: Stocks can also provide unlimited earnings, depending on the type of stocks and the performance of the companies you invest in. While stock market returns are generally more predictable, with historical averages around 7-10% annually, certain high-growth stocks or successful investments can lead to substantial, even life-changing returns. However, like any investment, there is risk involved, and not all stocks will provide the same level of growth.

Illustration 6: Scalability is an important factor to take into account.

Key Consideration: If you are willing to take on the risk for potentially higher earnings, starting a business could be ideal. However, if you prefer steady growth with more predictable returns, investing in stocks may be the better choice, with the opportunity for unlimited earnings depending on your investment choices.

6. Control and Decision-Making

Starting a Business: Starting a business offers full control over decision-making, allowing entrepreneurs to shape the direction of the company, set goals, and implement strategies. However, this autonomy comes with the responsibility for both the successes and failures of the business. Entrepreneurs must navigate challenges, adapt to changes, and make critical decisions across all aspects of the business, from operations to finances and marketing.

It also means that entrepreneurs will have to face a lot more stress and work, as mentioned, longer hours. They also need to have a much broader skillset, taking decision in everything from marketing issues to supply chain issues.

Investing in Stocks: When investing in stocks, you have control over which stocks to buy and sell, but you don’t have direct influence over the day-to-day operations or strategic decisions of the companies in which you invest. Your role is limited to making investment decisions based on research and analysis, leaving the management and execution to the company’s leadership team. While you can vote on certain company matters (in the case of voting shares), your impact on decisions is minimal compared to owning and running a business.

Key Consideration: If you value autonomy and want to have complete control over your decisions and the direction of a business, entrepreneurship offers that control. On the other hand, if you prefer to invest in established companies and trust in their management teams to execute plans, stock investing is a good option, allowing you to benefit from their expertise without the responsibility of day-to-day management.

7. Market and Economic Conditions

Starting a Business: Market trends, customer demand, and overall economic conditions play a significant role in determining the viability and success of a business. If the market is favorable, with strong consumer demand and economic stability, it can provide a solid foundation for a new venture. However, economic downturns, shifts in consumer preferences, or high competition can make it difficult for a business to succeed, even if the entrepreneur has a strong plan in place.

Investing in Stocks: Similarly, market cycles have a major impact on stock prices, and economic downturns can reduce the value of investments, lower returns, or lead to losses. Stock prices are often affected by broader economic conditions such as inflation, interest rates, and corporate earnings. While investors can benefit from economic booms and growing markets, economic recessions or market volatility can negatively influence the performance of stocks.

Key Consideration: If the economy is booming and there is strong demand for your business idea, it could be an ideal time to start a business. On the other hand, if markets are stable and showing steady growth, investing in stocks may offer a safer, more predictable opportunity with the potential for growth. The decision depends largely on your perception of the market’s current and future conditions. However, both starting a business and investing in stocks will be affected by the economy and market conditions, and it is near impossible timing the market.

8. Tax Cons

Starting a Business: Business owners can benefit from a variety of tax deductions that can help reduce their taxable income. These include deductions for business expenses like operational costs, office supplies, salaries, marketing, and even depreciation of assets. By deducting these expenses, business owners can lower their overall tax burden, making it more cost-effective to run and grow a business. However, the specific deductions available may vary depending on the country and local tax laws.

Investing in Stocks: When it comes to investing in stocks, capital gains tax applies to profits made from selling investments. However, there are tax-efficient strategies that can help reduce liabilities, such as holding investments for the long term to qualify for lower long-term capital gains tax rates or using tax-advantaged retirement accounts like IRAs or 401(k)s. These strategies can minimize the amount of taxes owed on investment profits, allowing investors to keep more of their earnings.

What is Professional Tax: Check Tax Slab Rates & Exemption

Illustration 7: One of the most important factors that is very often forgotten. There can be a lot of money to be saved in deductions.

Key Consideration: Depending on the tax laws in your country, one option may be more tax-efficient than the other. For instance, owning a business may offer more immediate tax benefits through deductions, while investing in stocks might provide more favorable tax treatment on long-term gains or through retirement accounts. The right choice will depend on your specific financial situation and the tax regulations in your area.

9. Emotional and Psychological Factors

Starting a Business: Starting a business involves significant emotional and psychological challenges. Entrepreneurs often face high levels of stress due to the uncertainty of the venture’s success, tight deadlines, and the need to make tough decisions on a daily basis. There are frequent emotional ups and downs, from the excitement of achieving milestones to the pressure of overcoming setbacks. Running a business requires a strong sense of persistence, resilience, and the ability to manage stress while navigating unpredictable challenges.

Illustration 8: The emotional and psychological effect is also a factor to take into account.

Investing in Stocks: Investing in stocks can also be stressful, particularly during market downturns or when investments don’t perform as expected. However, it is generally less emotionally taxing than running a business because investors have less daily involvement in managing the companies they invest in. While market volatility can lead to anxiety, stock investors typically have a more analytical, long-term focus and may be able to detach emotionally from short-term fluctuations.

Key Consideration: If you thrive under pressure and can manage uncertainty effectively, entrepreneurship might be the right path for you. It requires a hands-on approach and the ability to stay focused despite challenges. On the other hand, if you prefer a more analytical and systematic approach to decision-making, stock investing may be a better fit, offering the opportunity to reduce emotional strain while still achieving financial growth.

10. Exit Strategy

Starting a Business: Exiting a business can be a complex and time-consuming process. The most common exit strategies include selling the business, merging with another company, or liquidating the assets. Each option requires careful planning and consideration, as it often involves negotiations, legal procedures, and tax implications. The process can take months or even years, depending on the business size and market conditions, and may not always result in a favorable return.

Investing in Stocks: Stocks, on the other hand, are liquid assets that can be sold at any time, providing more flexibility and ease of access to your money. Unlike a business, which requires a detailed exit strategy, stocks can be quickly converted into cash based on market conditions. This liquidity makes investing in stocks a more accessible option for those who may need to access their funds more readily or prefer to have more control over when and how they liquidate their investments.

Key Consideration: If you value flexibility and easier access to your money, investing in stocks is likely the better option. The liquidity of stocks allows for quicker exits and fewer complications, whereas exiting a business often involves a more involved and uncertain process.

Conclusion: Which One Is Right for You?

Choosing between starting a business and investing in stocks depends on your personal preferences, financial situation, and risk tolerance.

Go for starting a business if:
- You have a high-risk tolerance.
- You have capital and funding options.
- You are passionate about building something from scratch.
- You can handle stress and uncertainty.
- You want full control over your financial future
Go for investing in stocks if:
- You prefer a passive income strategy.
- You have limited capital.
- You enjoy analyzing financial markets.
- You want a liquid and flexible investment.
- You prefer less direct involvement in management.

Dominion Energy: A comprehensive Stock analysis of one of Americas leading Energy Providers

By DaveRobinson

On February 5, 2025

In Ukategorisert

Introduction to Dominion as Company

Dominion Energy, Inc. is one of the largest energy companies in the United States, supplying electricity and natural gas to millions of customers across multiple states. As the world transitions toward more sustainable energy solutions, Dominion Energy has been at the forefront of embracing innovative approaches while maintaining its commitment to reliability and affordability. Dominion Energy has positioned itself as a leader in the transition to clean energy while continuing to provide essential services to homes and businesses.

History and Background

Dominion Energy was originally founded as the Virginia Railway & Power Company in 1909. Over the decades, it underwent several transformations and mergers to become the Dominion Energy we know today. Headquartered in Richmond, Virginia, the company has expanded its reach and diversified its energy portfolio, integrating renewable energy sources into its traditional mix of fossil fuels and nuclear power.

In the late 20th and early 21st centuries, Dominion Energy aggressively expanded its operations through acquisitions and infrastructure projects. Notable acquisitions include Consolidated Natural Gas Company in 2000 and Questar Corporation in 2016, which strengthened its position in natural gas distribution. The company has also sold off certain non-core assets, such as its gas transmission and storage business to Berkshire Hathaway Energy in 2020, allowing it to focus more on its regulated utility operations and clean energy investments.

Operation and Service Areas

Dominion Energy serves more than 7 million customers across 16 states, primarily in the Midwest, Mid-Atlantic, and Southeastern regions of the United States. The company operates through major business segments:

Dominion Energy Virginia – This segment focuses on electricity generation, transmission, and distribution in Virginia and North Carolina. It is the backbone of the company’s regulated electric utility business, serving over 2.5 million customers.
Gas Infrastructure Group – This segment handles natural gas transmission, storage, and distribution, serving millions of residential, commercial, and industrial customers. Dominion has extensive natural gas pipelines and underground storage facilities that play a crucial role in the nation’s energy infrastructure.
Contracted Generation – This segment manages long-term renewable energy projects and agreements, ensuring that Dominion is a key player in the transition toward cleaner energy sources.

Illustration 1: Logo of Dominion Energy symbolizing energy flow, innovation, strength and environmental commitment.

Energy Portfolio and Sustainability Initiatives

Dominion Energy is at the forefront of the clean energy movement. The company has pledged to achieve net-zero carbon dioxide (CO2) and methane emissions by 2050, aligning with global sustainability goals. Some of its key initiatives include:

Renewable Energy Expansion: Dominion Energy is investing heavily in solar and wind energy projects, including the Coastal Virginia Offshore Wind (CVOW) project, which is the largest offshore wind farm under development in the United States. The company is also developing large-scale solar farms across Virginia and other states.

Nuclear Energy Commitment: The company continues to operate nuclear power plants, which provide reliable, carbon-free electricity. Dominion owns and operates several nuclear plants, including the North Anna and Surry plants in Virginia, which together generate a significant portion of the region’s power needs.

Hydrogen and Battery Storage: Dominion is exploring hydrogen energy storage and battery technology to enhance grid stability and integrate more renewable energy sources. It has begun pilot programs to test hydrogen’s viability as a clean energy source.

Grid Modernization: Dominion Energy is investing in smart grid technology, which includes the deployment of smart meters, automated distribution systems, and enhanced cybersecurity measures to improve reliability and efficiency.

Energy Efficiency Programs: The company has introduced various customer-focused programs that promote energy conservation, such as home energy assessments, rebates for energy-efficient appliances, and demand response programs that help reduce peak electricity usage.

Illustration 2: Nuclear Power plants, something Dominion is heavly committed to.

Challenges and Controversies

Like any major corporation, Dominion Energy has faced challenges and controversies. Some of these include:

Environmental Concerns: While making strides in sustainability, the company has faced criticism over past reliance on fossil fuels and its handling of coal ash disposal. Environmental groups have also raised concerns about certain pipeline projects that have been accused of disrupting ecosystems and communities.

Regulatory and Legal Issues: Dominion operates in a highly regulated industry and has had disputes over rate adjustments, infrastructure expansion, and compliance with federal and state environmental laws.

Public Pushback: Some large-scale energy projects, including natural gas pipelines and transmission lines, have met resistance from communities concerned about environmental and land use impacts. Protests and legal battles have delayed or halted some initiatives.

Future Outlook

Despite challenges, Dominion Energy is well-positioned for the future. The increasing focus on renewable energy, federal support for clean energy initiatives, and its strategic investments in infrastructure suggest continued growth. As the company progresses toward its net-zero emissions target, it remains committed to innovation and sustainability.

Several factors will shape Dominion Energy’s future:

Expansion of Offshore Wind: The Coastal Virginia Offshore Wind project will play a critical role in achieving clean energy goals. As more offshore wind projects receive government backing, Dominion stands to benefit from regulatory support and technological advancements.

Electrification of Transportation: As electric vehicle (EV) adoption grows, Dominion Energy is investing in EV infrastructure, including charging stations and grid upgrades to accommodate increased demand.

Advancements in Energy Storage: The development of more efficient and cost-effective battery storage solutions will be crucial for integrating intermittent renewable energy sources like solar and wind.

Political Activity and Charitable Contributions

The Dominion Political Action Committee (PAC) has been very active in donating to Virginia candidates. In 2009, the Dominion PAC donated a total of $814,885 with 56% going to Republicans and 41% to Democrats.Lobbyists for Dominion worked to pass West Virginia’s Critical Infrastructure Protection Act, a 2021 law creating felony penalties for protests targeting oil and gas facilities, which was described by its sponsor John Kelly as having been “requested by the natural gas industry”.

Dominion’s social investment program is carried out primarily through the Dominion Foundation, which gives about $20 million each year to charities in the states in which Dominion does business.

Dominion Energy Generation

Illustration 3 and 4: Dominion Energy Generation allocation in 2019 vs. expected generation allocation in 2035.

As can be deducted from illustration 3 and 4, in 2019 12% of Domion’s total electric production came from Coal, 5% from Solar, wind, hydro and biomass, 42% from natural gas and 42% from nuclear Energy.

Based on Illustrations 3 and 4, Dominion’s energy mix in 2019 consisted of 12% from coal, 5% from renewable sources (solar, wind, hydro, and biomass), 42% from natural gas, and another 42% from nuclear energy.

Illustration 5: Offshore wind farms, a sector Dominion is and will heavly invest in.

This distribution highlights Dominion’s significant presence in the nuclear energy sector, which is poised for substantial growth in the coming years due to the rising demand for reliable power driven by AI development. Additionally, Dominion remains a key player in the natural gas market.

However, as illustrated in Figure 4, the company aims to expand its renewable energy portfolio—boosting solar, wind, and hydro to 33%—while significantly reducing its reliance on coal and natural gas. This strategic shift positions Dominion as one of the most forward-thinking energy companies in the U.S. today.

2. Stock Analysis

In this section we will analyze Dominion Energy stock to see if it is a good stock to buy or not. Our philosophy is value investing meaning that we try to find good quality companies that are undervalued. However, we will give a holistic overview so all kind of investors with different philosophies can judge the stock for themselves.

Revenue and Profits

Illustration 6 and 7: Revenue of Dominion from 2009 to 2023.

As seen in Illustrations 6 and 7, Dominion Energy’s revenue has remained relatively flat over the past 14 years, showing no significant growth. In fact, the overall trend has been slightly downward, with the company generating higher revenue in 2009 than in 2023, despite only minor fluctuations over time. The lack of revenue growth, despite an expanding energy market and increasing demand for utilities, raises concerns about the company’s ability to capitalize on industry trends and drive long-term value for shareholders. This stagnation may indicate challenges in pricing power, customer acquisition, or strategic investments, which could impact future profitability and competitiveness.

The Company itself has made a lot of promises for the future and has positioned itself as one of the leaders in nuclear energy and green energy in the US. However, it’s past revenue record is not impressive, and shows that company had a hard time gaining revenue on its past focus areas.

Illustration 8 and 9: Net Income of Dominion Energy from 2009 to 2023.

As illustrated in Illustrations 8 and 9, Dominion Energy’s net income has remained relatively low over the past 14 years, which is notable given its size and position as a leading player in the U.S. nuclear energy sector. One key factor contributing to this is the company’s significant investment in green energy initiatives, such as the wind farm in the Carolinas, which has increased expenses and put pressure on profitability.

Moreover, Dominion Energy’s net income has been highly volatile, with large swings rather than a stable or upward trend—an aspect that raises concerns for investors. The lack of consistent growth in net income, coupled with periods of negative earnings, such as in 2020, is a major red flag. This suggests potential challenges in cost management, operational efficiency, or market positioning, which could impact long-term shareholder value and financial stability. The largest cost and expenses for Dominion Energy are Cost of Goods Sold (COGS) primarily expenses related to fuel, purchased power, operation, and maintenance costs necessary to generate and distribute electricity and natural gas. This shows that the business in itself isn’t as profitable when the costs eats away such a large part of the revenue.

Revenue breakdown

Illustration 10: Revenue Breakdown for Dominion Energy gathered from Yahoo finance

As illustrated in Illustration 10, Dominion Energy has a diverse range of revenue sources, unlike many companies that rely heavily on a single stream. This diversification is a positive factor, as it reduces the company’s vulnerability to fluctuations in any one revenue source, allowing it to maintain stability even if one segment underperforms.

However, Illustration 10 also highlights that Dominion Energy’s Cost of Goods Sold (COGS) represents a significant expense, which heavily impacts profitability. COGS includes costs related to fuel, purchased power, and operational expenses necessary for electricity and natural gas distribution. Given the nature of the utility industry, substantial costs such as fuel prices, electricity procurement, and depreciation are expected. Nonetheless, the high COGS suggests that Dominion Energy currently operates with relatively thin profit margins, limiting its overall profitability.

Earnings per shar (EPS)

Earnings Per Share (EPS) is a key financial metric that measures a company’s profitability on a per-share basis. It indicates how much profit a company generates for each outstanding share of its stock, and is used o assess a company’s financial health, profitability, and potential for growth. In other words this metric can tell us how profitable the business is,

Illustration 11: EPS for Dominion Energy from 2009 to 2023

The EPS figure itself isn’t the primary focus for value investors—it can be 0.2 or 10, but what truly matters is the price-to-earnings (P/E) ratio and the company’s ability to generate consistent earnings growth. A steadily increasing EPS over time signals strong financial health, profitability, and long-term value creation.

As illustrated in Illustration 11, Dominion Energy’s EPS has not shown meaningful growth over time, remaining at a similar level in 2023 as it was in 2009. Additionally, the EPS has been highly volatile, with large fluctuations rather than a stable upward trend—even turning negative in 2020. This inconsistency is a red flag for potential investors, as it suggests earnings instability, which can make future profitability unpredictable and increase investment risk.

Assets and Liabilities

Illustration 12 and 13: Assets, Liabilities and Total Shareholder Equity for Dominion Energy from 2009 to 2023.

When evaluating a company as a potential investment, understanding its assets and liabilities is crucial. If a local business owner offered to sell their shop, one of the first questions—after determining its profitability—would be about its equity and assets. The same principle applies when assessing publicly traded companies like Dominion Energy.

As shown in Illustrations 12 and 13, Dominion Energy has a strong asset base, with total assets growing steadily from $42,554 million in 2009 to $109,032 million in 2023. At the same time, total liabilities have also increased, rising from $31,369 million in 2009 to $81,503 million in 2024. However, this is not necessarily a red flag, as it is common for utility companies to see both assets and liabilities grow over time. Expanding operations, launching new utility projects, and building infrastructure—such as power plants and renewable energy facilities—naturally lead to higher debt levels.

The main concern in Dominion Energy’s balance sheet is its low cash on hand, which stood at just $184 million in 2023. Given the company’s size and debt obligations, this limited liquidity could pose a risk if unexpected financial challenges arise. Furthermore, Dominion Energy’s cash reserves have remained relatively stagnant over the past 14 years, rather than growing in line with its assets and liabilities. A stronger cash position would provide greater financial flexibility and resilience in times of economic uncertainty.

As seen in Illustration 13, Total Shareholder Equity—calculated as total assets minus total liabilities—has consistently grown over the past 14 years. This is a positive indicator for potential investors, as it suggests that Dominion Energy is building value over time rather than eroding its financial foundation. A steadily increasing shareholder equity indicates that the company’s assets are growing at a faster rate than its liabilities, which is a green flag for financial health. This trend suggests that Dominion Energy is successfully expanding its operations while maintaining a solid balance sheet. Additionally, rising equity provides a buffer against financial downturns, making the company more resilient in times of economic uncertainty. However, investors should also consider how this growth is achieved—whether through profitable operations or increased debt financing—to fully assess the sustainability of this trend.

Debt to Equity Ratio

Illustration 14 and 15: Debt to Equity Ratio of Dominion Energy from 2009 to 2023

The Debt-to-Equity (D/E) ratio is a key financial metric used to assess a company’s financial leverage and risk. It measures how much debt a company uses to finance its operations relative to shareholder equity. A high D/E ratio (greater than 1.0) suggests that the company relies heavily on debt financing, which can amplify financial risk, particularly during economic downturns when debt obligations may become more difficult to manage. In contrast, a low D/E ratio (below 1.0) indicates that the company is primarily financed through equity rather than debt, reducing financial risk but potentially limiting rapid expansion. A negative D/E ratio, on the other hand, signals that a company has more liabilities than equity—often considered a warning sign for investors.

Legendary value investors like Warren Buffett favor companies with a D/E ratio below 0.5, meaning they have at least twice as much equity as debt. Buffett avoids companies with excessive debt since high interest payments can erode profits, particularly in periods of economic instability. Additionally, he prioritizes businesses that maintain a stable or declining D/E ratio over time rather than those that take on large amounts of debt unexpectedly.

As illustrated in Figures 14 and 15, Dominion Energy’s Debt-to-Equity (D/E) ratio has remained consistently high, exceeding 2 and approaching 3 in recent years. This is a red flag for potential investors, as it indicates that the company relies heavily on debt to finance its operations and expansion. If interest rates rise or the company faces unexpected financial challenges, servicing this high level of debt could become more difficult, potentially impacting profitability and shareholder returns. Investors should closely monitor whether Dominion Energy can effectively manage its debt burden while continuing to grow its business.

Price to earnings ratio (P/E)

Illustration 15 and 16: P/E of Dominion Energy from 2010 to 2025.

For value investors, the most important metric when evaluating a stock is the price-to-earnings (P/E) ratio, which helps determine whether a company is undervalued or overvalued. Even if a company has outstanding financials, buying its stock at an excessively high price can lead to poor returns. To illustrate this, imagine that a local small business generates solid profits. The Business earns 1 million dollars in profit each year. One day the owner offers to sell you the business for $1, it would be an incredible deal. However, if he tries to sell it for $1 trillion dollars, no matter how successful the shop is, the price would be absurdly overvalued. The stock market operates in a similar way—companies can be cheaply priced on some days and highly expensive on others.

Legendary value investor Warren Buffett typically considers stocks with a P/E ratio of 15 or lower to be “bargains.” A high P/E ratio suggests that investors are paying a premium for the company’s earnings, potentially expecting significant growth. However, it also means that the stock is far more expensive compared to its earnings, which can be a red flag for value investors. The P/E ratio of the company has swinged widely in the past. It has went from bargain territory of only 4,93 in 2011 to strongly overpriced in 2021 with P/E of 62,2. However, the value today of 19,76 can be said to be around fairly priced. The company is at least not undervalued, and is as such not a good investment for any valueinvestor.

Dividend

Illustration 17 and 18: Dividend Payout in USD , and Dividend yield in % from 2005 to 2025. From makrotrends.

Dominion Energy offers a dividend yield of approximately 4.78%, which is attractive compared to the average yield in the utilities sector. This high yield can be appealing to income-focused investors seeking regular returns, and can be very appealing for income focused investors and for dividend investors.

However, the company’s dividend payout ratio—the proportion of earnings paid out as dividends—is notably high. Based on trailing earnings, the payout ratio stands at 93.68%, and it’s projected to be 96.74% for the current year. Such elevated payout ratios may not be sustainable in the long term, as they leave limited room for reinvestment into the company’s operations and growth initiative .For long-term growth investors, the high payout ratio and limited reinvestment ability might be a red flag indicating financial strain.

To Summarize:

✅ Green Flag:

Attractive Yield: With a ~5% dividend yield, Dominion Energy provides a solid income stream, which is appealing to dividend and income-focused investors.
Consistent Payout: The company has a history of paying dividends regularly, which suggests a commitment to returning capital to shareholders.

🚩 Red Flag:

Sustainability Concern: If earnings decline or debt obligations increase, maintaining such a high dividend could become unsustainable, leading to potential dividend cuts in the future.
High Payout Ratio (~94%): This means that nearly all of Dominion’s earnings are used to pay dividends, leaving little room for reinvestment in business growth.

Insider Trading

As can be seen from the table below, there has been no selling by any insiders recently. This is a green flag for investors since it shows that insiders are confident in the company as they have not sold their shares.

Illustration 19: Insider Trading register of Dominion Energy from Yahoo Finance

Other Company info

As illustrated below, Dominion Energy currently have 17,7 thousands employees which showcases a gradual increase from the 14,5 thousand employees it had in 2014. The company itself was founded in 1983, but was formerly known as Dominion Resources to 2017. It has the ticker D and is listed on the NYSE exchange. Its industry is officially Multi-Utilities and is in the Utilities sector. It has currently 840.01 million shares outstanding, and a Market Cap of USD 47.309 Billion. Its website is www.dominionenergy.com.

Dominion Energy has its headquarters at 120 Tredgar Street,, Richmond, Virginia 23219, United States of America.

Illustration 20-22: Number of employees at Dominion and its location in Richmond Virginia.

Final Verdict

Dominion Energy presents an interesting long-term opportunity, particularly for investors interested in renewable energy and nuclear power. The company is making significant investments in these sectors, which could position it well for the future energy transition. However, its financial health raises concerns.

While Dominion Energy has a strong asset base, its long-term debt and total liabilities continue to rise each year, increasing its financial risk. A substantial portion of its revenue is consumed by COGS and operating expenses, limiting profitability. As a result, the company is not highly profitable at present, and some of its expansion plans have failed to deliver expected results.

From a value investing perspective, Dominion Energy does not appear undervalued, making it a less attractive option for those seeking undervalued stocks with strong financials. While its dividend yield is high, it is unsustainable due to the company’s high payout ratio and inconsistent earnings. Investors should carefully weigh the long-term growth potential in renewable energy against the financial risks and limited profitability before making an investment decision. Our recommendation is not not to buy. If you like our content please consider becoming a subscriber by writing your e-mail below.