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Are Utilities Trading at a Fair Valuation?

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Valuation

US utilities have turned fairly cheap in the last few months—compared to the levels in November 2017. However, US utilities still seem to be trading at a premium to their historical averages. Currently, US utilities are trading at an EV-to-EBITDA valuation multiple of 10.4x—compared to their five-year valuation average of ~9x.

NextEra Energy (NEE) and Dominion Energy (D) are trading at 14x and 13.5x—higher than their historical EV-to-EBITDA valuations. Southern Company (SO) is trading at a valuation multiple of 10.4x—close to its historical average.

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PE multiple

Utilities seem to be fairly valued given their PE (price-to-earnings) multiples. Broader utilities are trading at an average PE multiple of 13.2x—compared to their historical average of ~14x.

NextEra Energy is trading at a PE multiple of 13x, while Duke Energy (DUK) is trading at 20x. Dominion Energy is trading at PE multiple of 15x.

Utilities (VPU) (XLU) are trading at their yearly lows. To see if utilities offer growth opportunities or if there’s more downside to come, read These S&P 500 Utilities at a 52-Week Low Offer a Big Gain Potential.

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