Business Insights on One Energy Stock amid Current Volatility – NRG Energy, Inc.

NRG Energy, Inc.

NRG Energy, Inc. Details

NRG Energy, Inc. (NYSE: NRG) is an integrated electricity generation company that also provides energy solutions and natural gas to small businesses, residents, and commercial & industrial customers through its diversified portfolio of retail brands. The company’s segments include Texas, East, and West/Other.

Result Performance for the Year Ended 31 December 2021 – (FY21)

• The company delivered impressive revenues of $26.9 billion in FY21, reflecting an increase of ~197% on FY20.
• It ended the year with cash and equivalents of $250 million.
• There was an increase in capital expenditures in FY 2021 at $269 million, compared to $230 million in FY20.
• The company reported a loss of 97 cents per share during Q4FY21. It also reported an uptick in adjusted EBITDA by over 3.1% to $433 million during the quarter, compared to the prior period.

Source: Company Reports, Analysis by Kalkine Group

The company has updated that on 1 December 2021, it closed the previously announced sale of ~4,850 MW of fossil generating assets to Generation Bridge, an affiliate of ArcLight Capital Partners. This resulted in net proceeds of $623 million.

Outlook

The company has maintained its guidance levels for FY22 with adjusted EBITDA in the range of $1,950-$2,250 million, and adjusted cash from operations in between $1,380-$1,680 million.

Key Risks

The onset of recent geopolitical unrest between Russia and Ukraine has posed significant unrest globally. The considerable movements in electricity prices suggest the effective use of heeding strategies to curtail commodity price risks.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV

Stock Information                                      

The company has delivered a 6-month and one-year return of ~-12.75% and ~2.73%, respectively. The stock is trading lower than the average of the 52-week high price of $46.10 and the 52-week low price of $31.94.

The stock has been valued using an EV/EBITDA multiple-based illustrative relative valuation, and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/EBITDA Multiple (NTM) (Peer Average), considering the decent outlook and impressive FY21 performance.

Considering the aforementioned factors along with impressive financial performance, a “Buy” recommendation has been assigned on the stock at the current market price of $36.62 per share, as on 10.57 am New York Time, USA (GMT-4) as of 23rd March 2022.

NRG Energy, Inc. is a part of Kalkine’s Global Green Energy Report

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.