Analyzing the Valuations of the Top-Performing Utility Stocks




All the stocks under consideration in this series are currently trading at their respective multiyear highs.

In this series, we’re analyzing the top three utility stocks that have delivered the highest returns in the last five years. Let’s discuss their current valuations.


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Will they continue to outperform?

NextEra Energy (NEE), the largest component of the Utilities Select Sector SPDR ETF (XLU), is currently trading at a forward PE multiple of 22x based on its earnings estimates for 2019. Its five-year historical average valuation is below this multiple, and utilities at large are trading at a multiple of close to ~18x. Thus, NextEra Energy stock seems to be trading at a premium valuation.

CMS Energy (CMS) stock is trading at a forward PE multiple of 21.6x, higher than its five-year average. NiSource (NI) is trading at a forward PE multiple of 21x.

Utility stocks (XLU) (IDU) seem to be trading at a premium valuation considering their forward valuations and their potential earnings growth. However, utilities generally grow at a slower earnings pace than broader markets. Their stable and increasing dividends likely justify their higher valuation.


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