NRG Energy Driving Growth From Texas

NRG Energy (NRG) recently announced its earnings for third quarter 2012. We are bullish on the stock because of its expected synergies, cheap valuations and strong liquidity/cash position for the company. The company has been working to improve its efficiency and cost savings.

For the first time in August, NRG declared its quarterly dividend of $0.09 per share, a dividend yield of 1.7%. With its FCF expected to be $900 - $950 million for 2012, free cash flow yield turns out to be 19%, which is a healthy sign and indicates that dividends would be sustained without any problem. If we look at the liquidity position of the company, it experienced an improvement of 30%. Total current liquidity for the 3Q 2012 was $2.71 billion up from $2.07 billion in 3Q 2011.

NRG has cheap valuations on a comparable basis. It has a price to book of 0.6x, less than that of its competitors. Its PEG of 2.6 also reflects that it offers cheap growth as compared to its competitors, TAC and CPN. NRG also has a strong balance sheet, evident by its debt to equity of 140% as compared to AES' 215% and CPN's 260%. Find more.