NextEra Energy: Close, But Not Worth Buying

| About: NextEra Energy, (NEE)

I've been focusing quite a bit on the energy market of late, as the price of oil escalates and it becomes increasingly apparent that new sources of energy are needed. Gold mining stocks are the most undervalued as a sector, in my opinion, but I do believe the right energy stocks will perform even better. And so, the search continues.

One company that I recently spent a fair amount of time reviewing is NextEra Energy (NYSE:NEE). I was drawn to the company because of some very positive attributes it possessed:

1. While NEE focuses on all aspects of energy, half of what it generates is natural gas, while 14% is nuclear. The remaining is a combination of other fossil fuels, wind, solar, and hydro. As a person who believes in the N2N energy paradigm -- natural gas as a bridge to nuclear -- this is a very appealing setup, and suggests a management team that understands N2N.

2. NEE is heavily invested in solar, but is doing so not just via solar panels but also via concentrated solar power (NYSE:CSP). CSP may be the answer to the critics who argue that solar will not be able to produce reliable baseload energy. I don't think CSP defeats the naysayers just yet, but I do view it as a step in the right direction. If a solar energy firm can use CSP technology to reliably provide baseload power, it has enormous potential.

3. NEE has positive earnings and has been issuing dividends for some time. The current dividend yield is 3.69%, EPS is 3.63, and its current P/E ratio is 16.41. As an investor looking for value plays in the energy market, these numbers look great.

Now, for the bad news.

1. Price has been on a tear since late November, rallying from just above $52 to its current price just under $60. It is also near the top of its 52 week range, which goes from 49 to 61.20. By its P/E ratio I'd say it's still undervalued, though I'm generally not a fan of buying near the top of a 52 week range. The stock does have a low beta of 0.56, though the market as a whole is getting more volatile, so that doesn't mean as much as it once did. This isn't a dealbreaker, but it does give me the urge to wait for a pullback.

2. The real dealbreaker, though, is the debt load the company bears. Its current ratio is a paltry 0.84; as it is below 1, this means the company's current liabilities are greater than its current assets. Perhaps even more alarming is the company's long-term debt, which currently stands at over $20 billion. I do believe the world is in the midst of an epic debt crisis, and that it is a poor idea to carry much debt through it. Moreover, debt appears to be growing; NEE reports rising long-term debt on each of the last five quarterly reports.

I'm sure for many this will not be a huge point, but for me, it certainly is. Insolvency is the primary driver of all markets, at this point, and I have a strong aversion to companies with unfavorable debt positions. For this reason, I'll pass on NEE, as promising as the firm may be in other regards.

If price can fall sharply, perhaps to near $37 -- the point it fell to in the October 2008 market crash -- I may re-consider my stance, especially if it appears as though the debt situation is being dealt with while earnings are staying strong. Nonetheless, I do believe NEE is an example of what a promising energy company looks like -- if only its balance sheet were healthier.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.