Analyzing Dynegy’s Valuation Compared to Its Peers
Let’s see how Dynegy (DYN) stock is valued compared to its peers. On March 22, 2017, the stock was trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation multiple of 9.3x. US utilities’ (XLU) average multiple is just above 10.0x.
The EV-to-EBITDA ratio provides a comparative idea of a company’s valuation, regardless of its capital structure. EV is the combination of a company’s market capitalization and debt minus its cash holdings.
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In comparison, NRG Energy (NRG) and Calpine (CPN) are currently trading at an EV-to-EBITDA valuation multiple of 10x. Both of the companies seem to be trading at a fair valuation compared to the industry average.
Elliott Management claimed that NRG Energy is “deeply undervalued” when it disclosed stake in the company. Read Is NRG Energy Really Deeply Undervalued? to learn more.