How Does Redeia Stack Up After Spain's New Grid Investment Plans in 2025?

Considering what to do with Redeia Corporación stock? You are in good company. It is one of those names that tends to split opinions, whether you are after stable income or long-term value. Over the past month, shares have nudged up by 1.0%, despite a sideways year-to-date move of -0.7%. In fact, if you look back further, the gains are a bit more impressive, stacking up to 29.1% over five years. Even so, recent dips like the 0.4% decline in the past week remind us that the path is rarely smooth, especially as the market digests shifts in energy regulations and evolving infrastructure priorities within Spain and Europe. As major indices weigh up renewables, infrastructure spend, and defensive plays, Redeia's relatively modest returns over the past year—just 0.3%—highlight a cautious optimism on the part of investors.

Of course, the big question is value. Our latest analysis gives Redeia a valuation score of 1 out of 6, meaning it only meets one metric typically used to flag undervalued opportunities. That might spark some second thoughts, but a single number never tells the whole story. Up next, we will break down what those valuation checks cover and see how Redeia fares on each. Plus, stick around for an even more insightful lens on the company’s true worth at the end of the article.

Redeia Corporación scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Redeia Corporación Dividend Discount Model (DDM) Analysis

The Dividend Discount Model (DDM) values a stock by estimating the present value of expected future dividends, taking into account both the stability and growth potential of those payouts. This approach is best suited for established companies like Redeia Corporación, where dividend history and sustainability are key considerations for investors.

For Redeia, the most recent dividend per share (DPS) stands at €0.85. The company has a healthy return on equity (ROE) of 12.85% and a high payout ratio of 85.7%, meaning most of its profits are distributed to shareholders. Based on these figures, the expected dividend growth rate is calculated at roughly 1.8%. This growth rate is derived using the formula (1 - payout ratio) x ROE. For Redeia, this supports the idea of modest but steady annual increases to future dividends.

After factoring in projected dividend streams and discounting them back to today's value, the DDM estimates Redeia’s intrinsic value at €15.06 per share. Compared against the latest market price, this implies the stock is 10.3% overvalued. In other words, current investors may be paying a slight premium for yield and stability.

Result: OVERVALUED

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

Our Dividend Discount Model (DDM) analysis suggests Redeia Corporación may be overvalued by 10.3%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Redeia Corporación Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular valuation multiple for profitable companies because it reflects how much investors are willing to pay today for a euro of earnings. This metric works especially well for mature, stable businesses like Redeia Corporación, where profits are consistent and predictable.

It is important to remember that a "fair" PE ratio is shaped by the market’s view on a company’s growth trajectory and its risks. Fast-growing companies often trade at higher PEs, while more cyclical or riskier firms see lower multiples. For electric utilities, industry stability often translates to modest but reliable earnings and, therefore, a narrower PE range.

Currently, Redeia trades at 17.57x earnings. This is higher than the average Electric Utilities peer at 13.71x and also above the broader industry average at 14.56x. However, Simply Wall St’s proprietary “Fair Ratio” for Redeia stands at 18.66x. The Fair Ratio improves on benchmarking against peers or industry averages, since it incorporates factors like Redeia’s earnings quality, profit margins, growth prospects, market capitalization, and risk profile. Essentially, it provides a more nuanced view based on Redeia’s specific fundamentals rather than generalizations.

Comparing Redeia’s actual PE multiple with the Fair Ratio, the stock’s valuation appears well-aligned to its risk and growth outlook. The PE ratio is just below the Fair Ratio, within a close margin of error.

Result: ABOUT RIGHT

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 Redeia Corporación Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personal investment story about a company, linking your views and expectations on Redeia Corporación to concrete financial forecasts and a calculated fair value.

Instead of just looking at numbers in isolation, Narratives allow you to connect the dots between what is happening in Redeia’s business, your own assumptions about future growth, profits and margins, and what you believe the shares are actually worth. This approach makes investing feel less like crunching abstract numbers and more like applying real-world context and judgment to your decisions.

On Simply Wall St’s Community page, Narratives are easy to find and use, helping millions of investors make decisions based on their own views, not just consensus. You can use Narratives to spot when Redeia’s current price is far below your fair value (a buying opportunity), or too high compared to your outlook (a possible sell). Narratives update automatically as new news or earnings come in, ensuring your investment thesis stays current.

For example, some investors may forecast higher energy demand and robust earnings, justifying a fair value of €20.8, while others anticipate tougher regulations and margin pressure, leading to a lower estimate of €15.0. Narratives let you tailor decisions to your unique perspective.

Do you think there's more to the story for Redeia Corporación? 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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