Sempra (SRE) Financial Statements

Sempra's financial health presents significant concerns when evaluated through the value investing lens of the GoodMoat framework. Starting with Section 2 Quality Indicators, the company shows several weak signals. Free Cash Flow generation is negative, with a -1.2% FCF yield, which fails the framework's threshold for a positive and growing FCF margin above 10-15%. Return on Invested Capital (ROIC) is implied to be low by the 5.8% Return on Equity (ROE), far below the sustainable high target of >15-20%. The balance sheet carries substantial leverage with a Debt/Equity ratio of 1.11, which is above the favourable level of Debt/EBITDA < 1.0x. Revenue growth is also a concern, showing a -0.2% YoY decline, which is inconsistent with the double-digit, sustainable growth sought for quality companies. Regarding Growth Assessment, the trajectory is unfavourable. The negative YoY revenue growth fails the test for sustained growth above 20% or even positive acceleration. The minimal dividend yield of 0.32% does not compensate for the lack of organic growth. While utilities often have regulated, visible revenue, the current financial metrics—particularly the negative free cash flow during a period of high capital expenditure typical for the sector—suggest the company is not efficiently converting earnings into cash for shareholders. The combination of high debt, weak profitability returns, and absent cash flow creates an overall profile that does not meet the quality gate for further valuation analysis under the framework's decision rules. Analysis based on data as of 2024-05-15.