A Look at NRG Energy’s Price Target, Valuation, and More
According to Wall Street analysts’ estimates, NRG Energy (NRG) stock has a mean price target of $30.40 against its current market price of $25.77. That implies an estimated upside of 18.0% going forward.
NRG Energy has the highest “buy” ratings from 90.0% of the ten analysts tracking it. Four of those analysts have recommended a “strong buy,” and five have recommended a “buy.” One analyst has rated the stock a “hold.” None of the analysts have currently rated the stock a “sell.”
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Texas-based NRG Energy is the largest merchant power producer company in the country. NRG stock is currently trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation multiple near 12.0x. It seems to be trading at a fair premium compared to its five-year historical average and even to the industry average. Utilities (XLU) (VPU) on average are trading at an EV-to-EBITDA multiple of 11.0x.
Activist shareholder Elliott Management said that NRG Energy is “deeply undervalued” when it disclosed its stake in the largest merchant power producer Bluescape Energy Partners earlier this year. NRG was trading at a valuation multiple of 9.0x at that time. The rally has resulted in a significant valuation surge for NRG since then.
Investors are expecting operational and strategic changes in NRG Energy, which might unlock value for them. Its proposed debt trimming and asset sales in a recently released transformation plan could improve the power producer’s balance sheet in the long term.