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Top Utility Stocks: Analyzing the Current Valuations

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Valuation

Let’s take a look at how the top utilities are valued as they approach their annual highs. NextEra Energy (NEE), the biggest utility, is trading at a forward PE ratio of 21x based on analysts’ earnings estimates for the next 12 months. The company’s five-year historical average valuation is ~20x, while utilities at large are trading at a forward PE ratio of ~18x. NextEra Energy stock seems to be trading at a premium compared to its historical valuation and its peers.

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Other top utilities

Southern Company (SO) stock is trading at a forward PE ratio of 16x. Southern Company seems to be trading at a discounted valuation compared to its historical average of 20x.

Duke Energy (DUK), the second-largest utility by market cap, is trading at a forward PE ratio of 18x based on its earnings estimates for the next 12 months. Duke Energy’s five-year average valuation is close to ~20x. Duke Energy looks fairly valued compared to its peers. Duke Energy appears to be trading at a discounted valuation compared to its historical average.

Dominion Energy (D) stock is trading at a forward PE ratio of 17x, which is lower than its historical average of 23x. Dominion Energy stock has underperformed its peers. In the last 12 months, broader utilities (XLU) have risen 15%, while Dominion has fallen 2% during the same period.

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