Constellation Energy (CEG): Reviewing Its Valuation Following Recent Share Price Pullback

Constellation Energy (CEG) caught some investors off guard this week with its latest dip, sliding nearly 4% over the past month after a stretch of strong gains earlier in the year. There was no single headline-making event driving the pullback. However, the move has prompted questions about whether the market is rethinking risks or simply taking profits after a big run.

Looking at the bigger picture, Constellation Energy shares are still up an impressive 60% over the past year and have climbed more than 280% since the company’s spinoff from Exelon in early 2022. Despite the lack of dramatic news lately, the stock’s momentum has cooled a bit in recent weeks. Constellation continues to post steady revenue and profit growth each year.

With shares coming off their highs, some investors may be asking whether this is a buying opportunity for Constellation Energy or if the market is already factoring in all the growth that remains.

Most Popular Narrative: 7% Undervalued

According to community narrative, Constellation Energy is considered undervalued, with analysts projecting a fair value that sits noticeably above the current share price. This valuation is driven by anticipated improvements in revenue and margins, supported by positive political and industry trends.

Strategic investments and progress in nuclear plant restarts (Crane Clean Energy Center), upgrades (900MW in engineering), and selective mergers and acquisitions (Calpine acquisition) offer visible avenues for substantial capacity additions and operational synergies. These developments are expected to enhance EBITDA and free cash flow over the medium to long term.

Interested in what is driving this positive narrative? There is a notable combination of cash flow projections, nuclear expansion, and premium contracts factored into the fair value. Want to know why analysts have confidence in strong future earnings and a premium valuation? Explore further to uncover the financial assumptions behind this price target and see what might set the stock apart from its utility peers.

Result: Fair Value of $333.84 (UNDERVALUED)

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

However, regulatory changes or shifts in large customer demand could challenge this outlook and prompt a meaningful reassessment of Constellation Energy’s valuation.

Find out about the key risks to this Constellation Energy narrative.

Another View: DCF Tells a Different Story

While analysts see Constellation Energy as undervalued based on future earnings, our SWS DCF model suggests the stock is actually trading well above its fair value today. Does this method highlight hidden risks, or is the market interpreting the information differently?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Constellation Energy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Constellation Energy Narrative

If you want to dive deeper or come to your own conclusions, you can piece together your own view of Constellation Energy in just a few minutes, or do it your way.

A great starting point for your Constellation Energy research is our analysis highlighting 2 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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