Capital Power (TSX:CPX): Assessing Valuation After New Long-Term Contracts and Battery Storage Launch

Capital Power (TSX:CPX) just landed a fresh long-term contract for its Midland Cogeneration Venture that runs through 2040, featuring better terms than before. The company also launched 170 MW of new battery storage capacity in Ontario. Both moves bring more steady, contracted revenue into the fold, setting the stage for future growth and operational stability.

See our latest analysis for Capital Power.

Shares of Capital Power have surged lately, jumping more than 21% over the past 90 days, with a strong 1-year total shareholder return of nearly 47%. The combination of new long-term contracts, battery storage expansion, and continued dividend affirmations appears to be fueling momentum. Investors seem to be taking the company’s growth and stability signals to heart after a year of impressive overall gains.

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With all these gains and positive momentum in recent quarters, the big question is whether Capital Power’s strong run leaves the stock undervalued, or if the market has already priced in much of the future growth.

Most Popular Narrative: 4.5% Undervalued

Market consensus places Capital Power’s fair value just above today's share price, reflecting an uptick in future earnings potential and profit margins. Here is one catalyst that is shaping analyst beliefs right now.

Operational efficiency gains and successful asset upgrades (for example, Genesee repowering and planned optimizations at newly acquired PJM assets) are lowering emissions costs, improving spark spreads, reducing carbon tax exposure, and extending asset life. These factors enhance net margins and support EBITDA expansion.

Read the complete narrative.

Curious what bold bets and financial forecasts back this valuation? The real driver is margin transformation and profit multiples more commonly seen in growth sectors. Want to know how analysts justify paying up for a utility? See what is behind these headline numbers and what could move the needle next.

Result: Fair Value of $73.96 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, execution missteps or weaker-than-expected electricity demand growth could quickly shift the outlook and remove some of the recent valuation upside.

Find out about the key risks to this Capital Power narrative.

Build Your Own Capital Power Narrative

If you have a different take or want to dig deeper into the figures, you can craft your own view of Capital Power in just a few minutes. Do it your way.

A great starting point for your Capital Power research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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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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