- Wondering whether Consolidated Edison at around US$111.52 is offering fair value or asking too much for its steady utility profile? This article walks through how that price compares with several common valuation checks.
- The share price has recently been fairly steady, with a 0.2% decline over the last 7 days, a 0.5% return over 30 days, 11.5% year to date, 6.8% over 1 year, 30.5% over 3 years, and 79.0% over 5 years.
- Recent attention on power grid resilience and regulated utilities as potential core holdings has kept Consolidated Edison on many investors' watchlists. At the same time, shifts in interest rate expectations and income focused investing have put extra focus on how investors are valuing regulated utilities in general.
- Right now, Consolidated Edison has a valuation score of 2/6. The stock screens as undervalued on 2 out of 6 checks. The next sections will unpack those methods and then move on to a broader way to think about value beyond the usual models.
Consolidated Edison scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Consolidated Edison Dividend Discount Model (DDM) Analysis
The Dividend Discount Model estimates what a stock might be worth by projecting future dividends, applying an assumed long term growth rate, then discounting those dividends back to today.
For Consolidated Edison, the model uses a current dividend per share of about US$3.77, a return on equity of 8.58%, and a dividend payout ratio of roughly 58.21%. The long term dividend growth rate used is 3.41%, capped from a slightly higher starting point, with an expected overall growth rate input of 3.59%. These inputs are intended to reflect a steady, regulated utility type profile in which dividends are a central part of the investment case.
On these assumptions, the DDM arrives at an estimated intrinsic value of about US$105.59 per share. With the recent share price around US$111.52, the model implies the stock is about 5.6% overvalued, which is a relatively small gap and within the kind of range that can come from small changes in growth or discount rate assumptions.
Result: ABOUT RIGHT
Consolidated Edison is fairly valued according to our Dividend Discount Model (DDM), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.
Approach 2: Consolidated Edison Price vs Earnings
For a profitable company like Consolidated Edison, the P/E ratio is a useful shorthand for how much you are paying for each dollar of current earnings. It is simple, widely used, and ties directly to the bottom line that ultimately supports dividends and reinvestment.
What counts as a "normal" P/E depends on how the market views a company’s growth outlook and risk profile. Higher expected earnings growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually points to a lower multiple.
Consolidated Edison currently trades on a P/E of about 19.9x. That sits slightly above the Integrated Utilities industry average of 19.0x and a little below the peer average of 20.4x. Simply Wall St’s Fair Ratio metric, which estimates a P/E of 24.5x for Consolidated Edison, goes a step further by adjusting for factors such as earnings growth, profit margins, company size and specific risk characteristics, rather than relying only on broad peer and industry comparisons.
Compared with this Fair Ratio of 24.5x, the current 19.9x P/E suggests the stock is trading at a discount to what that model would imply.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your Consolidated Edison Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are a way for you to attach a clear story about Consolidated Edison to the numbers you care about, such as your own view of fair value and your expectations for future revenue, earnings and margins.
A Narrative links what you believe about the business, for example how stable its regulated utility profile might be, to a forecast and then to a fair value that you can compare directly with the current share price.
On Simply Wall St’s Community page, Narratives are a straightforward tool that many investors already use to set their own fair value, see how it differs from the market price, and decide whether that gap is wide enough to consider buying or selling. Each Narrative is automatically refreshed as new information, such as news or earnings, is added to the platform.
For Consolidated Edison, one investor might set a relatively low fair value because they assume slower revenue growth and more modest profit margins, while another might set a higher fair value because they expect steadier earnings and stronger margins from its regulated operations.
Do you think there's more to the story for Consolidated Edison? Head over to our Community to see what others are saying!
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.
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