CIA ENERGETICA DE-SPON ADR (NYSE:CIG) – A GARP Candidate in the Utilities Sector

Companhia Energética de Minas Gerais SA (NYSE:CIG) stands out as a potential candidate for long-term investors following a growth-at-a-reasonable-price (GARP) strategy. The Brazilian utility company meets several key criteria from Peter Lynch’s investment approach, combining steady growth, solid profitability, and an attractive valuation.

Why CIG Fits the GARP Profile

• Strong Historical Growth: CIG has delivered a 5-year average EPS growth of 26.37%, well above the minimum 15% threshold in Lynch’s strategy. While future EPS growth is expected to slow, the company’s past performance demonstrates its ability to expand earnings consistently.
• Attractive Valuation: With a PEG ratio of 0.17 (far below Lynch’s preferred threshold of 1), CIG appears undervalued relative to its historical growth. Its P/E ratio of 4.36 is also significantly lower than both the industry and S&P 500 averages.
• Healthy Financials: The company maintains a Debt/Equity ratio of 0.46, indicating a conservative capital structure. Its Current Ratio of 1.06 suggests sufficient liquidity to cover short-term obligations.
• High Profitability: CIG’s Return on Equity (ROE) of 25.09% ranks in the top 6% of its industry, reflecting efficient use of shareholder capital.

Fundamental Analysis Summary

CIG’s fundamental report highlights a mixed but generally favorable outlook:

• Profitability: Strong ROE and improving margins, though operating margins lag some peers.
• Dividend: A 3.11% yield with a history of growth, though sustainability concerns exist due to a high payout ratio.
• Valuation: Cheap across multiple metrics, including P/E, EV/EBITDA, and Price/FCF.
• Growth Concerns: Expected EPS declines may weigh on future performance, requiring further research.

For investors seeking reasonably priced growth stocks, CIG presents an interesting case in the utilities sector. While risks exist—particularly around earnings sustainability—its valuation and historical metrics align with GARP principles.

Our Peter Lynch Strategy screener lists more stocks matching these criteria and is updated regularly.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.