For questions about this article or underlying research, email [email protected].

Sempra (SRE) trades at 16.7 times earnings, against 21.9 for the median S&P 500 company. The stock lost 13.3% in the past twelve months, and the price appears to assume a utility that has stopped delivering. For that to be wrong, Oncor, its Texas business, has to keep lifting profit, and Sempra has to pay for its capital spending without debt outgrowing that profit. So is the business under this lower price still earning more?

Sempra Has Earned More While Its Stock Fell

Sempra earned $3.07 billion in the twelve months ended September 30, 2026, up from $2.16 billion in the twelve months before. Operating margin rose to 28.2% from 22.5% over the same two periods, meaning the low multiple is based on a growing profit rather than a shrinking one.

Management credits Texas for most of the growth in its adjusted earnings, a different measure from the profit above. On the November 5, 2026 call, it said the double-digit growth in adjusted earnings per share so far in 2026 came primarily from Sempra Texas. Adjusted earnings for fiscal Q3 2026 were $917 million, up 26% from a year earlier, by management's count. Demand in Texas is still rising, too: Sempra's Texas system reached a new peak of 33 gigawatts, 6% above the previous record.

Sempra's Sales Shrank While It Borrowed More

The longer record is weaker, and Sempra has not yet shown it can fund its capital spending without debt outgrowing profit. Revenue was $13.6 billion in the latest twelve months, below the $16.7 billion of the twelve months ended September 30, 2023. The latest twelve months show a 0.9% decline, after a 6.1% rise the year before and a 22.6% drop the year before that.

Over the same years, Sempra spent more cash than its business brought in. Free cash flow, the cash left after investment, was -$4.87 billion in the latest twelve months, against -$3.07 billion in the twelve months ended September 30, 2023. Total debt rose to $37.5 billion at September 30, 2026, from $30.7 billion three years earlier. Profit grew more slowly over those years, to $3.07 billion from $2.78 billion. That debt equals 73.2% of Sempra's market value, against 19.5% for the S&P 500 as a whole.

How Will Sempra Pay For More Texas Spending?

Management named a stake sale and new borrowing among its funding options. On the November 5, 2026 call, it listed proceeds from selling a 45% stake in SI Partners, along with hybrid and debt financings, and said it expected that sale to close within two weeks. Its list also included what management called "our established ATM program" and "incremental capital recycling." The spending is set to grow: management expects Oncor's 2027 through 2031 base capital plan to be about 20% larger than its existing $47.5 billion capital plan.

Management has also set a bar for profit, affirming its long-term EPS growth rate of 7% to 9% and its 2027 EPS guidance of $5.10 to $5.70. Pending regulatory outcomes could put 2027 results in the lower half of the 2027 range, management said, after California regulators proposed denying a request from its utilities to change a 2024 rate decision, a filing management described as correcting an error. Management said that hit is limited to 2027, because new California rates are expected to take effect in January 2028.

What Would A Sempra Buyer Be Betting On?

For your portfolio, Sempra would be a utility with a growing profit, priced at a discount, that spends more cash than it brings in. Buying at this price is a bet that the market has mispriced a sound business: that Texas keeps lifting profit, and that Sempra can pay for a bigger Oncor plan without its debt growing faster than its profit.

The Texas growth is holding so far, and the funding is the weaker part. The measures to watch are the size of the new Oncor plan, which management plans to give with its fourth-quarter report in February 2027, and how Sempra pays for it.

Not Sure Sempra Is Worth It At This Price?

You don't have to bet on one stock to earn. The Trefis Income Solution owns 50 companies chosen to keep paying dividends, each with at least 10 straight years of dividends, yielding about 3x the S&P 500.

See If It Fits Your Plan

Spot an error or want more like this? Tell us in 10 seconds.