- Whether you are wondering if Consolidated Edison at around US$111.89 represents fair value, a bargain, or is quietly getting expensive, this article is designed to address that question directly.
- The stock has seen mixed recent returns, with a 2.4% decline over the last week and a 2.6% decline over the last month, set against an 11.9% gain year to date and 3.0% over the past year.
- Recent coverage around Consolidated Edison has focused on its role as a major regulated utility, its position in the broader Integrated Utilities sector, and how investors are weighing income stability against interest rate moves and other market forces. This context helps explain why sentiment around the stock can shift even when the business model appears relatively steady.
- Right now, Consolidated Edison has a valuation score of 2 out of 6. This means some checks flag potential undervaluation while others do not. The next step is to compare what different valuation methods indicate and then consider an even better way to interpret those results by the end of the article.
Consolidated Edison scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Consolidated Edison Dividend Discount Model (DDM) Analysis
The Dividend Discount Model estimates what a stock could be worth by projecting future dividends and discounting them back to today. It is most useful for established dividend payers like Consolidated Edison.
For NYSE:ED, the DDM uses an annual dividend per share of about US$3.77, a return on equity of 8.58% and a payout ratio of roughly 58%. The implied dividend growth rate is capped at 3.41%, slightly below the model’s raw expected growth of about 3.59%. This growth cap is intended to keep the long term assumptions conservative and more sustainable relative to the company’s profitability.
Based on these inputs, the model arrives at an intrinsic value of about US$105.59 per share. Compared with a current share price around US$111.89, the DDM output suggests the stock is roughly 6.0% above this model-based estimate of fair value, so it appears close to its estimated fair value band rather than glaringly cheap or expensive.
Result: ABOUT RIGHT
Consolidated Edison is fairly valued according to our Dividend Discount Model (DDM), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.
Approach 2: Consolidated Edison Price vs Earnings
For a profitable company like Consolidated Edison, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. Investors typically accept a higher or lower P/E depending on expectations for future earnings growth and how risky those earnings appear to be.
Consolidated Edison currently trades on a P/E of about 20.38x. That is close to both the Integrated Utilities industry average P/E of around 19.34x and a peer average of about 20.85x, suggesting the market is valuing its earnings in a similar range to comparable utilities.
Simply Wall St’s Fair Ratio for Consolidated Edison is 23.63x. This is a proprietary estimate of what the P/E could be given factors such as the company’s earnings growth profile, industry, profit margins, market cap and specific risks. Because it adjusts for these company level characteristics, the Fair Ratio can be more informative than a simple comparison against peers or a broad industry average.
Comparing the Fair Ratio of 23.63x with the current P/E of 20.38x indicates the shares are trading below that model based reference point.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Consolidated Edison Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so meet Narratives, a simple tool that lets you set the story behind your numbers by linking your view of Consolidated Edison’s business, your forecast for its future revenue, earnings and margins, and the fair value that falls out of those assumptions.
A Narrative connects what you believe about the company to an explicit financial forecast, which then produces a fair value that you can compare directly with the current share price to help decide whether the stock looks appealing or not.
On Simply Wall St, millions of investors use Narratives on the Community page to do exactly this. The fair values update automatically when new information such as earnings releases or news is added, so your view can stay aligned with the latest data without extra work.
For Consolidated Edison, one investor might see a relatively cautious future and set a lower fair value, while another might expect steadier earnings and assign a higher fair value. Narratives makes those different views clear by showing each fair value alongside the current price.
Do you think there's more to the story for Consolidated Edison? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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