LSE:NG.

Stock Analysis Report

Executive Summary

National Grid plc transmits and distributes electricity and natural gas.

Rewards

Trading at 9.4% below its fair value

Earnings are forecast to grow 4.83% per year

Pays a reliable dividend of 4.98%

Risk Analysis

Debt is not well covered by operating cash flow

Dividend of 5.1% is not well covered by earnings

Large one-off items impacting financial results

Profit margins (9.8%) are lower than last year (22.5%)



Snowflake Analysis

Average dividend payer and slightly overvalued.


Similar Companies

Share Price & News

How has National Grid's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: NG. has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

3.2%

NG.

1.6%

GB Integrated Utilities

-3.0%

GB Market


1 Year Return

26.2%

NG.

19.7%

GB Integrated Utilities

11.0%

GB Market

Return vs Industry: NG. exceeded the UK Integrated Utilities industry which returned 15.4% over the past year.

Return vs Market: NG. exceeded the UK Market which returned 12.7% over the past year.


Shareholder returns

NG.IndustryMarket
7 Day3.2%1.6%-3.0%
30 Day6.0%6.4%-2.4%
90 Day13.0%10.9%3.9%
1 Year33.6%26.2%25.8%19.7%16.8%11.0%
3 Year27.9%0.7%51.6%28.0%20.0%4.7%
5 Year39.9%0.4%23.4%-5.3%38.9%6.8%

Price Volatility Vs. Market

How volatile is National Grid's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is National Grid undervalued compared to its fair value and its price relative to the market?

1.7%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: NG. (£9.39) is trading below our estimate of fair value (£10.36)

Significantly Below Fair Value: NG. is trading below fair value, but not by a significant amount.


Price To Earnings Ratio

PE vs Industry: NG. is poor value based on its PE Ratio (23.9x) compared to the Integrated Utilities industry average (23.6x).

PE vs Market: NG. is poor value based on its PE Ratio (22x) compared to the UK market (18.5x).


Price to Earnings Growth Ratio

PEG Ratio: NG. is poor value based on its PEG Ratio (4.6x)


Price to Book Ratio

PB vs Industry: NG. is good value based on its PB Ratio (1.7x) compared to the XE Integrated Utilities industry average (1.9x).


Next Steps

Future Growth

How is National Grid forecast to perform in the next 1 to 3 years based on estimates from 17 analysts?

4.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: NG.'s forecast earnings growth (4.8% per year) is above the savings rate (0.5%).

Earnings vs Market: NG.'s earnings (4.8% per year) are forecast to grow slower than the UK market (11.7% per year).

High Growth Earnings: NG.'s earnings are forecast to grow, but not significantly.

Revenue vs Market: NG.'s revenue (3.2% per year) is forecast to grow slower than the UK market (3.6% per year).

High Growth Revenue: NG.'s revenue (3.2% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: NG.'s Return on Equity is forecast to be low in 3 years time (9.9%).


Next Steps

Past Performance

How has National Grid performed over the past 5 years?

2.7%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: NG. has a large one-off loss of £526.4M impacting its September 30 2019 financial results.

Growing Profit Margin: NG.'s current net profit margins (9.8%) are lower than last year (22.5%).


Past Earnings Growth Analysis

Earnings Trend: NG.'s earnings have grown by 2.7% per year over the past 5 years.

Accelerating Growth: NG.'s has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: NG. had negative earnings growth (-56.5%) over the past year, making it difficult to compare to the Integrated Utilities industry average (-3.6%).


Return on Equity

High ROE: NG.'s Return on Equity (7.7%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is National Grid's financial position?


Financial Position Analysis

Short Term Liabilities: NG.'s short term assets (£6.7B) do not cover its short term liabilities (£9.5B).

Long Term Liabilities: NG.'s short term assets (£6.7B) do not cover its long term liabilities (£37.7B).


Debt to Equity History and Analysis

Debt Level: NG.'s debt to equity ratio (171%) is considered high.

Reducing Debt: NG.'s debt to equity ratio has reduced from 221.2% to 171% over the past 5 years.

Debt Coverage: NG.'s debt is not well covered by operating cash flow (13.5%).

Interest Coverage: NG.'s interest payments on its debt are well covered by EBIT (3.6x coverage).


Balance Sheet

Inventory Level: NG. has a high level of physical assets or inventory.

Debt Coverage by Assets: NG.'s debt is not covered by short term assets (assets are 0.2x debt).


Next Steps

Dividend

What is National Grid's current dividend yield, its reliability and sustainability?

4.69%

Current Dividend Yield


Dividend Yield vs Market

company4.7%marketbottom25%1.9%markettop25%5.1%industryaverage4.2%forecastin3Years4.9%

Current dividend yield vs market & industry

Notable Dividend: NG.'s dividend (5.1%) is higher than the bottom 25% of dividend payers in the UK market (1.83%).

High Dividend: NG.'s dividend (4.98%) is low compared to the top 25% of dividend payers in the UK market (5%).


Stability and Growth of Payments

Stable Dividend: NG.'s dividends per share have been stable in the past 10 years.

Growing Dividend: NG.'s dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (112.1%), NG.'s dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: NG.'s dividends in 3 years are forecast to be covered by earnings (85.7% payout ratio).


Next Steps

Management

What is the CEO of National Grid's salary, the management and board of directors tenure and is there insider trading?

2.4yrs

Average management tenure


CEO

John Pettigrew (50yo)

3.8yrs

Tenure

UK£4,562,000

Compensation

Mr. John Pettigrew, FEI, FIET, has been Chief Executive Officer at National Grid USA since April 01, 2016. Mr. Pettigrew has been the Chief Executive Officer at National Grid plc since April 1, 2016 and as ...


CEO Compensation Analysis

Compensation vs Market: John's total compensation ($USD5.99M) is above average for companies of similar size in the UK market ($USD4.48M).

Compensation vs Earnings: John's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.


Management Age and Tenure

2.4yrs

Average Tenure

51yo

Average Age

Experienced Management: NG.'s management team is considered experienced (2.4 years average tenure).


Board Age and Tenure

6.5yrs

Average Tenure

58yo

Average Age

Experienced Board: NG.'s board of directors are considered experienced (6.5 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

SellUK£280,29315 Jul 19
Alison Kay
EntityIndividual
Role
Member of the Board of Directors
Group General Counsel
Shares33,285
Max PriceUK£8.42
SellUK£470,27915 Jul 19
Lucy Shaw
EntityIndividual
Role
Member of the Board of Directors
Executive Director of UK & Executive Director
Shares55,846
Max PriceUK£8.42
SellUK£1,101,78715 Jul 19
John Pettigrew
EntityIndividual
Role
Chief Executive Officer
CEO & Executive Director
Shares130,838
Max PriceUK£8.42
SellUK£114,46715 Jul 19
Andrew Agg
EntityIndividual
Role
Member of the Board of Directors
CFO & Executive Director
Shares13,593
Max PriceUK£8.42
BuyUK£48,43422 May 19
Peter Gershon
EntityIndividual
Role
Chairman of the Board
Chairman
Shares6,000
Max PriceUK£8.07

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Alison Kay (55yo)

    Group General Counsel

    • Tenure: 7yrs
  • Badar Khan

    Interim President of US and Group Director of Corporate Development & National Grid Ventures

    • Tenure: 2.8yrs
  • Andy Doyle (52yo)

    Chief Human Resources Officer

    • Tenure: 0.8yrs
  • Nicola Shaw (50yo)

    Executive Director of UK & Executive Director

    • Tenure: 3.5yrs
    • Compensation: UK£2.20m
  • Aarti Singhal

    Director of Investor Relations

    • Lisa Lambert

      Senior VP and Chief Technology & Innovation Officer

      • Tenure: 2yrs
    • Ken Daly

      Chief Operating Officer for U.S. Electricity Businesses

      • Tenure: 1.8yrs
    • Andi Karaboutis (56yo)

      Group Chief Information & Digital Officer

      • John Pettigrew (50yo)

        CEO & Executive Director

        • Tenure: 3.8yrs
        • Compensation: UK£4.56m
      • Andy Agg (49yo)

        CFO & Executive Director

        • Tenure: 1yrs
        • Compensation: UK£807.00k

      Board Members

      • Alison Kay (55yo)

        Group General Counsel

        • Tenure: 7yrs
      • Mark Williamson (61yo)

        Senior Independent Director

        • Tenure: 6.5yrs
        • Compensation: UK£136.00k
      • John Sherlock Dawson (67yo)

        Independent Non-Executive Director

        • Tenure: 6.8yrs
        • Compensation: UK£110.00k
      • Paul Golby (68yo)

        Independent Non-Executive Director

        • Tenure: 7.9yrs
        • Compensation: UK£106.00k
      • Peter Gershon (72yo)

        Chairman

        • Tenure: 8yrs
        • Compensation: UK£606.00k
      • Thérèse Esperdy (58yo)

        Independent Non-Executive Director

        • Tenure: 5.8yrs
        • Compensation: UK£153.00k
      • Nicola Shaw (50yo)

        Executive Director of UK & Executive Director

        • Tenure: 3.5yrs
        • Compensation: UK£2.20m
      • John Pettigrew (50yo)

        CEO & Executive Director

        • Tenure: 3.8yrs
        • Compensation: UK£4.56m
      • Andy Agg (49yo)

        CFO & Executive Director

        • Tenure: 1yrs
        • Compensation: UK£807.00k
      • David Wright

        Chief Electricity Engineer

        Company Information

        National Grid plc's company bio, employee growth, exchange listings and data sources


        Key Information

        • Name: National Grid plc
        • Ticker: NG.
        • Exchange: LSE
        • Founded: 1990
        • Industry: Multi-Utilities
        • Sector: Utilities
        • Market Cap: UK£35.742b
        • Shares outstanding: 3.51b
        • Website: https://www.nationalgridet.com

        Number of Employees


        Location

        • National Grid plc
        • 1-3 Strand
        • London
        • Greater London
        • WC2N 5EH
        • United Kingdom

        Listings

        TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
        NG.LSE (London Stock Exchange)ORD GBP0.12431289GBGBPNo data
        NGGT.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDNov 1995
        NG.LSE (London Stock Exchange)YesOrdinary SharesGBGBPNov 1995
        NNGFXTRA (XETRA Trading Platform)YesOrdinary SharesDEEURNov 1995
        NNGFDB (Deutsche Boerse AG)YesOrdinary SharesDEEURNov 1995
        NGLBATS-CHIXE (BATS 'Chi-X Europe')YesOrdinary SharesGBGBPNov 1995
        NGGNYSE (New York Stock Exchange)SPONSORED ADR NEUSUSDOct 1999
        NNGDDB (Deutsche Boerse AG)SPONSORED ADR NEDEEUROct 1999
        NGGBASE (Buenos Aires Stock Exchange)CEDEAR EACH REP 1/2 ORD GBP0.10ARARSAug 2007

        Biography

        National Grid plc transmits and distributes electricity and natural gas. It operates through UK Electricity Transmission, UK Gas Transmission, US Regulated, and National Grid Ventures (NGV) and Other segments. The UK Electricity Transmission segment owns and operates electricity transmission networks, which comprise approximately 7,212 kilometres of overhead lines; 2,280 kilometres of underground cables; and 347 substations in England and Wales, as well as Scottish electricity transmission systems. The UK Gas Transmission segment owns and operates gas transmission systems that include approximately 7,660 kilometres of high-pressure pipes; and 24 compressor stations connecting to 8 distribution networks in Great Britain, as well as third-party independent systems and liquefied natural gas (LNG) storage facilities. The US Regulated segments owns and operates transmission facilities across upstate New York, Massachusetts, New Hampshire, Rhode Island, and Vermont; and electricity distribution networks in upstate New York, Massachusetts, and Rhode Island. Its assets comprise 14,293 kilometres of overhead lines, 169 kilometres of underground cables, and 377 transmission substations; an electricity distribution network of approximately 117,230 circuit kilometres and 763 distribution substations; a network of approximately 57,228 kilometres of gas pipeline serving an area of approximately 25,659 square kilometres; and approximately 787 kilometres of gas transmission pipes. The NGV and Other segment engages in the energy metering business; transporting primarily renewable energy long distances through its electricity interconnectors; and storing LNG, as well as property development and insurance activities in the United Kingdom and United States. The company was founded in 1990 and is headquartered in London, the United Kingdom. 


        Company Analysis and Financial Data Status

        All financial data provided by Standard & Poor's Capital IQ.
        DataLast Updated (UTC time)
        Company Analysis2020/01/28 20:56
        End of Day Share Price2020/01/28 00:00
        Earnings2019/09/30
        Annual Earnings2019/03/31


        Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.