- If you are wondering whether Consolidated Edison at about US$105.63 a share is offering fair value or a potential opportunity right now, this article breaks down what the current price might be telling you.
- The stock is up 5.6% year to date and 4.4% over the past year, after declines of 2.7% over the last week and 4.4% over the past month. This can leave investors asking whether recent moves reflect changing expectations or shorter term sentiment.
- Recent coverage around utilities has focused on how income focused investors are weighing steady dividend payers against other income options. This helps frame how a stock like Consolidated Edison is being viewed. There has also been ongoing discussion about how regulated utilities fit into portfolios as investors reassess risk, providing useful context for recent price moves.
- Simply Wall St currently assigns Consolidated Edison a valuation score of 4/6. The rest of this article will walk through what that means using several common valuation approaches before finishing with a different way of thinking about value that ties them all together.
Find out why Consolidated Edison's 4.4% return over the last year is lagging behind its peers.
Approach 1: Consolidated Edison Dividend Discount Model (DDM) Analysis
The Dividend Discount Model estimates what a stock might be worth by projecting its future dividend payments and then discounting those payments back to today. It is especially useful for companies where dividends are a key part of the return.
For Consolidated Edison, the DDM uses a current annual dividend per share of about US$3.81, a return on equity of 8.73% and a payout ratio of roughly 57.64%. That payout level suggests the company is retaining a significant share of its earnings, which can support future dividend capacity if earnings stay healthy. The model applies a dividend growth rate of 3.54%, capped from a slightly higher starting figure, and an expected growth rate of roughly 3.70% in the underlying drivers.
Putting these assumptions together, the model arrives at an estimated intrinsic value of about US$106.92 per share. Compared with the recent share price of roughly US$105.63, this implies the stock is 1.2% undervalued, which is a very small gap and indicates that the market price is close to the modelled value.
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, the P/E ratio is a useful way to gauge what you are paying for each dollar of earnings, which matters a lot for a mature, steady utility like Consolidated Edison. A higher or lower P/E is often linked to what investors expect for future growth and how much risk they are willing to accept, so there is no single “right” number, just a range that tends to make sense for a given business.
Consolidated Edison currently trades on a P/E of about 18.1x, compared with the Integrated Utilities industry average of roughly 18.8x and a peer average of about 20.6x. Simply Wall St’s Fair Ratio for the stock is 22.9x. This Fair Ratio is a proprietary estimate of what the P/E might be given factors such as earnings growth profile, profit margins, industry, market cap and specific risks. It aims to be more tailored than a simple comparison with peers or the broad industry, which may not share the same characteristics.
Since the Fair Ratio of 22.9x is higher than the current P/E of 18.1x, the P/E based view suggests the stock screens as undervalued on this metric.
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. This is where Narratives come in as a simple story that you attach to your numbers, linking your view of Consolidated Edison to assumptions about its future revenue, earnings, margins and a fair value estimate.
A Narrative connects three pieces: what you think the company is doing and why it matters, how that story feeds into a financial forecast, and what fair value that forecast supports compared with the current share price.
On Simply Wall St’s Community page, Narratives are available as an easy tool used by millions of investors, helping you see how your own fair value for Consolidated Edison compares to the current US$105.63 price so you can judge whether it looks attractive or stretched on your terms.
Narratives are updated as new information such as news or earnings is added. For example, a more cautious investor might set a lower fair value for Consolidated Edison while a more optimistic investor might set a higher one.
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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