Is Duke Energy Still Fairly Priced After Recent Run Up And Dividend Outlook?

• If you are wondering whether Duke Energy is still a solid utility at a fair price or if the market has quietly bid it up too far, you are not alone. That is exactly what we are going to unpack here.
• The stock is up 13.7% over the last year and 29.8% over three years, even after a recent 5.1% pullback over the last month, which comes on top of a 9.0% gain year to date.
• Recently, investors have been reacting to a mix of regulatory updates, large scale grid modernization plans and ongoing investment in renewable and cleaner generation assets, all of which affect how stable and predictable Duke Energy's future cash flows look. These developments help explain why the stock has climbed over the last year while still showing some short term volatility as the market reassesses risk and growth.
• On our framework, Duke Energy scores a 3 out of 6 valuation checks. This suggests that while it looks undervalued on some measures, others are more finely balanced. We will walk through DCF, multiples and yield based approaches next, before finishing with a more intuitive way to think about what the market might really be pricing in.

Find out why Duke Energy's 13.7% return over the last year is lagging behind its peers.

Approach 1: Duke Energy Dividend Discount Model (DDM) Analysis

The Dividend Discount Model estimates what a stock is worth today by projecting all future dividends, then discounting them back to a present value that reflects the risk of the cash flows.

For Duke Energy, the model starts with an annual dividend per share of about $4.49. Management is paying out roughly 101.9% of earnings as dividends, which is higher than a typical sustainable range for a regulated utility. Using the classic DDM formula, growth is derived from how much profit is reinvested and the return on that equity. In this case, the implied growth rate is slightly negative at around 0.17%, based on an 8.8% return on equity and the fact that, on paper, Duke is paying out more than it earns.

When these dividend assumptions are discounted back, the model produces an intrinsic value of roughly $63.07 per share, suggesting the stock is about 86.4% overvalued relative to the current market price. On this dividend based view, investors are paying a big premium for Duke's yield.

Result: OVERVALUED

Our Dividend Discount Model (DDM) analysis suggests Duke Energy may be overvalued by 86.4%. Discover 917 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: Duke Energy Price vs Earnings

For a profitable, mature utility like Duke Energy, the price to earnings ratio is a practical way to gauge valuation because earnings tend to be relatively stable and closely tied to the regulated asset base. Investors generally accept paying a higher PE when they expect stronger growth or see lower risk in future earnings, and they demand a lower PE when growth is modest or risks are elevated.

Duke currently trades on a PE of about 18.6x, which is slightly below the Electric Utilities industry average of around 19.6x and well below the broader peer group at roughly 26.4x. Simply Wall St goes a step further with its Fair Ratio, an estimate of what Duke’s PE should be given its specific earnings growth outlook, profit margins, size and risk profile. For Duke, that Fair Ratio is 24.2x, implying the market is applying a noticeably lower multiple than the company’s fundamentals might justify. Because the Fair Ratio adjusts for factors that industry and peer comparisons ignore, it offers a more tailored view of value. On this basis, Duke screens as undervalued on earnings.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1456 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Duke Energy Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simple, story driven forecasts that let you explain your view of Duke Energy in your own words while linking that story to expectations for future revenue, earnings, margins and ultimately a fair value estimate. A Narrative connects three things: what you believe is happening in the business, how that should show up in the numbers over time, and what a reasonable fair value per share is as a result. On Simply Wall St, millions of investors build and explore Narratives on the Community page, where you can easily compare your chosen fair value with the current market price to clarify whether Duke looks like a buy, hold or sell. These Narratives update dynamically as new earnings, news or regulatory changes arrive, so the story and the valuation stay in sync. For example, one Duke Narrative might see booming Southeast data center demand and regulatory support justifying a fair value around $136 per share. In contrast, a more cautious investor could assume slower growth, more regulatory friction and higher funding costs, and therefore adopt a much lower fair value that argues for patience or trimming their position.

Do you think there's more to the story for Duke Energy? Head over to our Community to see what others are saying!

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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