Recent returns and business profile

Southwest Gas Holdings (SWX) has drawn attention after a period of positive share performance, including a 2.4% move over the past day, a 4.8% gain over the past month, and 9% over the past 3 months.

The company, valued at about US$6.4b, reports annual revenue of US$1,940.38m and net income of US$239.48m, with both revenue and net income showing annual growth figures in the low to mid teens.

Through its Southwest Gas Corporation subsidiary, the utility purchases, distributes, and transports natural gas to roughly 2,281,000 customers across Arizona, Nevada, and California. Its operations are supported by a pipeline transmission system and an LNG storage facility.

At a share price of US$90.51, Southwest Gas Holdings has recently seen short term momentum cool slightly compared with earlier gains. Its 1-year total shareholder return of 27.6% and 3-year total shareholder return of 78.7% point to a stronger longer term trend.

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After that kind of recent run, the key question is simple: is Southwest Gas Holdings still trading at a reasonable valuation, or is the market already pricing in most of the future growth story?

Most Popular Narrative: 6% Undervalued

Analysts following Southwest Gas Holdings currently see fair value at about $95.86 per share versus the latest close of $90.51, which sets up a modest valuation gap and a focused earnings story.

Analysts expect earnings to reach $432.2 million (and earnings per share of $5.77) by about April 2029, up from $239.5 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $478.6 million.

The fair value call here does not rest on one simple metric. It blends steady revenue expansion, firmer margins, and a future earnings multiple that assumes investors keep paying up for this profile. Investors may be curious which specific growth and profitability assumptions have the most impact on that $95.86 figure and how sensitive the narrative is if they change slightly.

Result: Fair Value of $95.86 (UNDERVALUED)

However, faster decarbonization policies or tougher environmental rules that limit cost recovery on big projects like Great Basin could quickly challenge this earnings story.

Another View on Valuation

While the analyst fair value pins Southwest Gas Holdings at about $95.86 per share, the current P/E of 27.3x tells a different story. This compares with 14.8x for the global gas utilities group and a fair ratio of 23.1x, which points to a richer price tag and less margin for error if expectations soften.

Next Steps

Given the mix of optimism and caution in this story, it makes sense to move quickly, check the underlying data, and decide where you stand. To see both sides in one place, start with our breakdown of 2 key rewards and 2 important warning signs

Looking for more investment ideas?

If Southwest Gas Holdings is on your radar, do not stop there. This is a good moment to widen your watchlist with a few focused stock ideas.

• Zero in on potential mispricings by scanning 55 high quality undervalued stocks that combine quality fundamentals with prices that may not fully reflect their financial profile.
• Build a steadier income stream by reviewing 13 dividend fortresses that offer higher yields and consistent payout histories.
• Prioritise resilience by checking 74 resilient stocks with low risk scores that pair lower risk scores with solid financial footing.

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.