uploads///XLU stk

XLU: How US Utilities Are Currently Valued


Nov. 20 2020, Updated 3:20 p.m. ET


Currently, US utility stocks are trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 11x—higher than the historical average of 8x–9x. They seem to be trading at a large premium considering their PE (price-to-earnings) multiple. Historically, they traded at a PE ratio of ~14x–15x, while their current PE multiple is beyond 18x–19x.

Duke Energy (DUK) and NextEra Energy (NEE) are trading at an EV-to-EBITDA valuation multiple of 12.2x and 13x, respectively.

So far, US utilities have had a decent run this year. The Utilities Select Sector SPDR ETF (XLU) has risen more than 14%, while the SPDR S&P 500 (SPX-INDEX) (SPY) has risen 15% year-to-date.

Utility stocks (VPU) have been rising in the past few months, despite being overvalued. Their premium dividend yield could be one of the main reasons why investors are sheltering under utility stocks.

Article continues below advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.