Sempra (SRE) Margin Decline Reinforces Questions on Premium Valuation and Slower Growth Prospects

Sempra (SRE) reported earnings growth that averaged 13.5% per year over the past five years. However, this past year saw a reversal, with net profit margins dropping to 20% from 22.1% previously and earnings growth slipping into negative territory, making year-over-year comparisons less favorable. The company is forecast to grow earnings at 10.08% annually going forward, while revenues are expected to rise by 2.8% per year. This rate trails the broader US market’s average of 10.5%. Investors will likely weigh the promise of steady, moderate growth against softer margins and a recent slowdown in profitability.

See our full analysis for Sempra.

The next section examines how these latest numbers align with the most widely followed narratives, revealing what might be confirmed and what could come under new scrutiny.

See what the community is saying about SempraNYSE:SRE Earnings & Revenue History as at Nov 2025

Margins Lag, but Texas Growth Offers Upside

Analysts expect Sempra’s profit margins to climb from 20% today to 22.7% in three years, with Texas grid modernization and electrification driving regulated asset expansion. According to the analysts' consensus view, current margin improvement potential is underpinned by:

Multi-billion dollar capital investments in Texas infrastructure are set to expand the rate base and boost future returns as new legislation accelerates capital recovery and improves Oncor’s earned ROE by 50 to 100 basis points. Grid upgrades and decarbonization trends provide a path for Sempra to achieve higher long-term revenue, directly challenging skeptics focused on last year’s margin dip. Consensus notes these positive drivers must overcome a slower 2.8% forecasted annual revenue growth rate and recent negative earnings growth to truly vindicate expectations for sustained, sector-leading profitability. Consensus narrative highlights the tension between stable regulated growth and the challenge of maintaining higher margins in a lower-growth, competitive market. To dig deeper into how Sempra’s regulated assets and margin trends shape future prospects, read the full consensus narrative. 📊 Read the full Sempra Consensus Narrative.

Premium Valuation Stands Out Against Peers

Sempra’s Price-to-Earnings Ratio sits at 22.6x, exceeding both US peer average (19.5x) and the global integrated utilities industry (18.4x). Its current share price of $92.39 is nearly 17% above DCF fair value of $79.21. Consensus narrative raises the possibility that the premium may reflect Sempra’s perceived quality and stable asset base, but also flags:

The current valuation leaves little room for disappointment if margin recovery or infrastructure-led growth falls short of expectations. The analyst target price of $95.67 is only about 3.5% higher than the share price, implying limited upside for new investors unless future execution exceeds forecasts.

Story Continues

Infrastructure Bets Carry Regulatory and Dividend Risks

Sempra faces both a major and a minor risk, related to dividend sustainability and its overall financial position, even as it pursues heavy capital investment in utilities and LNG projects. Consensus narrative observes that these risks could materially alter Sempra’s investment case if:

Regulatory or legislative changes in key markets like California and Texas compress allowed returns or create unexpected costs, threatening net margin expansion. Tighter balance sheet or dividend concerns force a shift away from long-term growth investments, capping both earnings upside and the stability prized by yield-focused investors.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Sempra on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Have a unique take on the latest figures? Bring your perspective to life and shape your own view in just a few minutes: Do it your way.

A great starting point for your Sempra research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

See What Else Is Out There

Sempra’s premium valuation, slowing earnings, and modest revenue growth suggest limited upside unless margin expansion and infrastructure returns clearly outpace peers.

If you want stronger value for your money, check out these 838 undervalued stocks based on cash flows to spot stocks currently trading below their intrinsic worth and with more upside potential.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include SRE.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

View Comments