After a steady rally in the last few months, profit-booking took utilities down. The recent weakness in these defensives could be an opportunity for investors due to their discounted valuation. PPL (PPL), a mid-sized regulated utility, is trading at a forward PE ratio of 11x based on analysts’ EPS estimates for 2019. PPL appears to be trading at a discounted valuation considering broader utilities’ average valuation close to 16x–17x.
PPL stock looks attractive
PPL’s five-year historical average valuation is ~14x. PPL stock looks attractive compared to its historical valuation. PPL’s management expects its EPS to grow 5% annually for the next few years—in line with the industry average. PPL’s regulated operations bode well for stable and predictabile earnings.
PPL stock offers a dividend yield of 5.8%—the highest among the top utilities with an average yield of ~3.4%. To learn more, read How PPL’s Dividend Profile Looks Going into 2019.
Xcel Energy (XEL), PPL’s peer and one of the top regulated utilities, is trading at a forward PE ratio of 18x—marginally lower than its five-year historical average. Consolidated Edison (ED) stock trades at a forward PE ratio of 17x.
PPL stock underperformed its peers in 2018. The stock fell 8%, while the Utilities Select Sector SPDR ETF (XLU) rose 2% last year. Xcel Energy stock rose marginally, while Consolidated Edison fell 9% in 2018.