Edison International (EIX) is back in focus after California lawmakers passed wildfire legislation without key protections for utilities, including a per incident liability cap and limits on insurers’ subrogation rights.
The selloff around the wildfire bill has been sharp, with Edison International’s share price falling 21.37% over the past week and 19.86% over the past month, even though the 1-year total shareholder return is 11.20% and the 5-year total shareholder return is 27.03%.
Spot under-pressure utilities like Edison International and compare them to other grid and power players using our hand picked 39 power grid technology and infrastructure stocks.Bulls see a regulated grid operator sold off too far on policy fear. Bears see uncapped wildfire risk that justifies a lower bar. Which side does Edison International’s current valuation look closer to after this drop?
Most Popular Narrative: 22.6% Undervalued
Against the latest fair value narrative of $75.96, Edison International’s last close at $58.80 screens as materially cheaper, which puts more weight on the assumptions behind that gap.
Significant state and federal investment, along with policy momentum for decarbonization, will underwrite large-scale grid modernization and renewable energy integration projects, providing Edison International with stable, above-inflation capital expenditure opportunities and growing its regulated rate base, supporting earnings and rate base-driven revenue growth.
Read the complete narrative. Read the complete narrative.
Want to see what drives that valuation uplift for Edison International? The narrative leans on measured load growth, a sizeable regulated investment plan and a re-rated earnings multiple. Curious how those pieces fit together?
Result: Fair Value of $75.96 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the Edison International story still hinges on how wildfire liabilities and tighter regulatory oversight of cost recovery ultimately affect earnings and cash flows.
Find out about the key risks to this Edison International narrative.
Next Steps
Feeling torn between the risks and rewards around Edison International after this selloff? Act while the details are fresh and weigh both sides with our breakdown of 3 key rewards and 3 important warning signs.
Looking for more investment ideas beyond Edison International?
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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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