AGL Energy‘s [ASX:AGL] share price is slowly making a comeback from a fairly dismal year, currently sitting at 33 cents higher than where it started the day.
The energy giant’s stock has had a 52-week low of $20.16 and high of $26.52.
AGL deals in the generation and retailing of electricity and gas for residential and commercial use. The company currently has a market cap of $14.36 billion.
Why is AGL in the news?
Earlier this month, gas infrastructure operator APA Group [ASX:APA] announced a deal with AGL for the development and construction of the Crib Point pipeline and transportation of gas to the domestic market.
AGL later announced a further agreement with the Port of Hastings Development Authority for the long-term use of a berth at Crib Point.
According to AGL CEO Andy Vesey, the partnership was integral to provide an additional source of gas for SA, and to address the potential shortfalls that could arise in the Victorian market from 2021 onwards.
This project will reduce AGL’s exposure to old gas supply sources in Victoria, volatile gas markets in Queensland, and will further ease the pressure on wholesale gas prices.
These projects should supposedly have a positive impact on the company. However, the prospect of such long-term developments failed to excite investors following the announcement, seeing AGL fall 1% to $21.02.
Due to its poor performance, is it wise to sell your AGL shares?
Buying a stock means you’re entitled to the company’s future earnings, not their past behaviour. Therefore it’s more useful to focus on what you’ll receive.
AGL currently has an expected annual growth rate of 6.98%, so it’s fair to say there’s robust growth ahead for this large-cap stock.
However, there are still a few factors to consider before you invest.
Firstly, any energy farming company is or will soon be in the firing line. Despite how attractive their low stock price may be, these controversial companies have at least five years to look for new gas sites as natural resources are being used up.
Secondly, AGL’s debt levels should also be considered.
While the company’s share price theoretically only accounts for the value of AGL’s equity level, it’s important to assess their debt levels, as they effect their earning capacity and risk.
The company’s debt is sitting at a level that doesn’t immediately call for concern. The current debt-to-earnings ratio depicts their level of debt to only make up for 37.65% of the company’s equity.
It isn’t an alarming amount, but if you’re considering an investment, you should still proceed with caution.
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