National Grid (LSE:NG.): Revisiting Valuation After a Strong Year of Defensive Outperformance

National Grid (LSE:NG.) has quietly outperformed over the past year, delivering a 23% total return while defensive utilities were out of favour. That raises a simple question for income investors: can this run continue?

See our latest analysis for National Grid.

That steady climb has not been a straight line, but the 19% year to date share price return, backed by an 80% five year total shareholder return, suggests momentum is still very much on National Grid’s side as investors reassess its regulated growth prospects.

If you are weighing up where else defensive cash flows meet growth, it is worth exploring fast growing stocks with high insider ownership as a source of fresh ideas beyond the utilities space.

With the shares trading only slightly below analyst targets and modestly under intrinsic value estimates, is National Grid still a quiet bargain for income seekers, or is the market already baking in its long term growth story?

Most Popular Narrative Narrative: 4.3% Undervalued

With National Grid’s shares last closing at £11.43 against a narrative fair value of £11.93, the story leans toward underappreciated regulated growth and capital deployment.

National Grid plans to invest around £60 billion in its networks over the next 5 years, which is expected to drive significant asset growth and provide strong visibility on future revenues. This is likely to positively impact future revenue streams and earnings growth.

Read the complete narrative.

Curious how planned network upgrades, richer margins and a future earnings multiple fit together to justify that pricing gap? The narrative’s projections reveal a surprisingly ambitious path for revenue, profits and valuation. Want to see exactly how those moving parts add up to today’s fair value call?

Result: Fair Value of $11.93 (UNDERVALUED)

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

However, regulatory setbacks around RIIO, or supply chain delays driving higher project costs, could quickly challenge the current growth and valuation narrative.

Find out about the key risks to this National Grid narrative.

Build Your Own National Grid Narrative

If you see the story differently or want to test your own assumptions against the numbers, you can build a full view yourself in minutes: Do it your way.

A great starting point for your National Grid research is our analysis highlighting 3 key rewards and 2 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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