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How Are Top Utility Stocks Valued in 2019?

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Jan. 4 2019, Updated 7:31 a.m. ET

Valuation

Among the top utilities, NextEra Energy (NEE) is trading at a forward PE ratio of 21x based on analysts’ estimated EPS for the next 12 months. NextEra Energy looks to be trading at a premium compared to its historical valuation and its peers. NextEra Energy’s five-year historical average valuation is ~20x. At the same time, NextEra Energy’s peers’ average forward PE ratio is close to 17x. Among the four biggest utility stocks, NextEra Energy’s earnings are expected to grow at a higher rate in 2019 compared to its peers.

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Are utilities valued attractively?

Southern Company (SO) stock is trading at a forward PE ratio of 14.5x based on analysts’ EPS for 2019. Southern Company looks to be trading at a discounted valuation compared to its historical valuation average around 20x.

Dominion Energy (D) stock has an attractive valuation. The stock is trading at a forward PE ratio of ~17.0x—compared to its five-year historical average PE ratio of 23x. Dominion Energy stock seems to be trading at a discount compared to its historical average valuation. Duke Energy (DUK) stock is trading at a valuation multiple of 17.5x—lower than its five-year average PE ratio.

Southern Company, Dominion Energy, and Duke Energy seem to be trading at a discounted valuation compared to their historical averages. However, they appear to be trading at a premium given their slow earnings growth in 2019.

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