Assessing NKT Shares After Strong Price Rally and European Grid Demand Boost

Deciding what to do with NKT stock right now might feel a bit like standing at a crossroads. Maybe you’re eyeing those recent price gains and wondering if there’s still more upside ahead, or perhaps you’re cautious after such a strong run. Over the past week, NKT shares have ticked up by 1.6%, and looking a bit further back, the 30-day return sits at an impressive 5.3%. Year-to-date, the stock has soared by 20.5%. If you zoom out even more, the long-term story gets even more interesting, with the stock climbing a huge 72.0% over three years and a remarkable 296.6% over five.

Much of this momentum can be traced back to the expanding market opportunities facing NKT, especially as demand for grid infrastructure rises and the energy transition accelerates across Europe. The company has clearly positioned itself to benefit from these macro trends, and that optimism has been reflected in both the share price and sentiment.

But, with a current valuation score of 3 out of 6—meaning the company is undervalued on three of six key valuation checks—it’s only natural to ask whether the stock is attractively priced right now, or if recent gains have stretched its value. In the next section, we will break down NKT’s score, looking closely at what traditional valuation metrics say about today’s price. Plus, stick around for a powerful framework that goes beyond the usual valuation Playbook.

Why NKT is lagging behind its peers

Approach 1: NKT Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the true value of a business by projecting its future cash flows and discounting those flows back to their value today. This approach helps investors understand what a company is worth based on its ability to generate cash in the years ahead, rather than simply focusing on profits or revenues.

For NKT, the latest twelve months of Free Cash Flow (FCF) stands at a negative €273 million. Looking forward, analysts expect a significant turnaround, projecting FCF to rise steadily year after year. By 2029, forecasts put NKT’s annual FCF at €402 million. Beyond five years, the projections are extrapolated, which presents a view of continued sustainable growth.

Using these cash flow estimates, the DCF model arrives at an intrinsic valuation of €1,412 per share. This figure is 55.6% higher than the current market price, suggesting that NKT is dramatically undervalued based on the strength of its future cash flows.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for NKT.

Our Discounted Cash Flow (DCF) analysis suggests NKT is undervalued by 55.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: NKT Price vs Earnings

The Price-to-Earnings (PE) ratio is widely considered the most reliable valuation metric for profitable companies, as it links the company’s current share price to its reported earnings. This approach helps investors quickly gauge how much the market is paying for each unit of profit, which is a crucial consideration for companies like NKT that have delivered consistent earnings.

Interpreting what a "fair" PE ratio should be involves looking at growth expectations and risk. Higher expected growth can justify a higher PE, while elevated risks can pull the ratio lower. NKT currently trades at a PE of 21.1x. This is below the average for the broader Electrical industry at 30.5x, but above the average of key peers at 16.7x. This signals that the market views NKT as having more positive attributes or stronger prospects than its immediate competitors, but still less exuberance than the sector as a whole.

Simply Wall St’s Fair Ratio calculation for NKT is 17.1x. Unlike simple peer or industry comparisons, the Fair Ratio blends a proprietary mix of company-specific data such as earnings growth, risks, profit margin, industry type, and market capitalization. This makes it a more nuanced and reliable yardstick for valuation. Because NKT’s current PE is above its Fair Ratio, the stock looks a little expensive compared to its underlying fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your NKT Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is a simple, powerful concept: it is your unique perspective on a company's future, combining your assumptions about fair value, revenue, earnings, and margins into a story that guides your investment decisions. Rather than relying solely on traditional ratios or analyst targets, Narratives link the company’s big-picture story to a financial forecast and then to an actionable fair value, connecting the “why” behind your numbers to what you do next.

Available right now for every company on Simply Wall St's Community page and used by millions of investors, Narratives make valuation easy and interactive by allowing you to share your thinking or review others’ views. With Narratives, you can see how your fair value estimate compares to the current price, enabling more confident buy or sell decisions. What is even more useful is that Narratives update dynamically whenever new breaking news or earnings reports come in so your view always reflects the latest information.

For example, with NKT, some investors see substantial upside and have set price targets as high as DKK851.0, while others, more cautious about future risks, have targets as low as DKK435.13.

Do you think there's more to the story for NKT? Create your own Narrative to let the Community know!

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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