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OGE Energy stock downgraded amid modest growth outlook

EditorEmilio Ghigini
Published 2024-05-23, 07:50 a/m
© Reuters.
OGE
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On Thursday, Argus Research changed its stance on OGE Energy Corp. (NYSE: NYSE:OGE), shifting the stock's rating from Buy to Hold. The firm acknowledged the electric utility company's strong cost controls, efficient generation facilities, and its exit from the midstream business, which has solidified its status as a pure-play electric utility.

The company also boasts a high yield, but Argus pointed out that both earnings and dividend growth are expected to be modest in the near term.

The downgrade follows a pattern of lower highs and lower lows in the stock's performance since August 2022, indicating a bearish trend. Despite a recent rally in the stock price, technical analysis suggests caution.

Argus also noted that OGE Energy's shares are currently trading at a multiple of 16 times the firm's 2025 earnings per share (EPS) estimate. This valuation is below the five-year historical average multiple of 18 times earnings.

Furthermore, the price-to-sales ratio of OGE Energy stands at 2.5, which is also under the five-year average of 2.9. Argus believes that these valuations are reasonable given the modest growth forecast for the company. While the near-term outlook has resulted in a Hold rating, the long-term perspective remains positive, with Argus maintaining a Buy rating for the long haul.

The company's dividend yield is approximately 4.5%, which Argus finds attractive. The research firm suggests that a potential upgrade back to a Buy rating could be considered if OGE Energy's earnings growth accelerates toward the upper single-digit range, indicating a more robust financial performance.

InvestingPro Insights

InvestingPro data indicates that OGE Energy Corp. (NYSE: OGE) has a market capitalization of $7.33 billion and trades with a price-to-earnings (P/E) ratio of 18.48, aligning closely with the historical average mentioned by Argus Research. The company's revenue growth for the last twelve months as of Q1 2024 has seen a decline of 18.83%, but the quarterly revenue growth paints a more positive picture with a 7.11% increase. OGE Energy's dividend yield is currently at 4.57%, which is consistent with the high yield noted by Argus and is supported by a history of dividend payments maintained for 54 consecutive years, an InvestingPro Tip that underscores the company's commitment to shareholder returns.

Two InvestingPro Tips for OGE Energy highlight the company's stability and potential risks: Firstly, the stock generally trades with low price volatility, which may appeal to investors seeking less turbulent assets. Secondly, the company's short-term obligations exceed its liquid assets, which could be a point of concern for those closely monitoring liquidity ratios. For investors interested in a deeper analysis, there are additional InvestingPro Tips available, providing a comprehensive view of OGE Energy's financial health and market position. To access these insights and more, use the promo code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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