Is Now the Right Moment for Duke Energy After Its 17% Rally?

Thinking about what to do with your Duke Energy shares? You are not alone. With the stock closing at $124.38 and racking up a year-to-date return of 15.4% so far, this utility powerhouse is commanding attention from investors who want both stability and growth. The past year has been particularly kind, with Duke Energy delivering a 17.0% return. If you look even further back, the stock has grown over 62% in the last five years, a rate that outpaces many of its peers.

Part of this momentum is tied to recent market shifts, where investors are leaning into reliable utility stocks amid broader economic uncertainty. That move has sent fresh capital Duke’s way and helped push its price higher over the last month and quarter. Still, for all the gains, is Duke Energy still a buy right now, or has the rally left its value behind?

Valuation is always the key question, and I have taken a close look at several approaches investors often use. For context, Duke Energy earns a value score of 3 out of 6 based on standard checks for undervaluation, meaning it looks undervalued in half of the most popular metrics. In a moment, we will dive into how those valuation methods shape the investing conversation, and I will share a simple but powerful perspective that may give you an even clearer picture before you make any big moves.

Why Duke Energy is lagging behind its peers

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

The Dividend Discount Model, or DDM, is a simple but effective way to estimate what a company is worth by projecting its future dividend payments and discounting them back to today's dollars. For utility companies like Duke Energy, which have steady dividend histories, this model can offer a particularly relevant lens.

According to the DDM, Duke Energy currently pays an annual dividend per share of $4.52. The company posts a return on equity of 8.48%, but also maintains an extremely high dividend payout ratio of 101.89%. This means Duke is paying out nearly all of its earnings as dividends, leaving very little room to fund future growth. As a result, the model projects essentially flat to modestly negative dividend growth, with an expected growth rate of -0.16%. These inputs are automatically calculated from the company's financials using a standard formula: (1 - payout ratio) multiplied by return on equity.

The model produces an intrinsic value estimate for Duke Energy stock of $65.17. With shares currently trading at $124.38, this suggests the stock is about 90.8% overvalued by this method. For investors relying on dividends, this valuation implies a note of caution.

Result: OVERVALUED

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

Our Dividend Discount Model (DDM) analysis suggests Duke Energy may be overvalued by 90.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Duke Energy Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a popular way to value profitable companies because it directly relates a company’s share price to its earnings. Since Duke Energy is steadily profitable, the PE ratio offers a clear window into how much investors are willing to pay for each dollar of earnings, taking both growth prospects and business risks into account.

Generally, investors expect faster-growing or less risky companies to trade at higher PE ratios. Therefore, it is important to weigh not just earnings, but also growth rates, margins, and market dynamics. Duke Energy currently trades at a PE ratio of 20.45x, which is slightly lower than the industry average of 21.25x and well below the peer group average of 26.96x. This suggests that on a surface level, Duke may be a comparatively good deal, given its placement among other electric utilities.

Simply Wall St’s “Fair Ratio” further analyzes the PE ratio by estimating the value justified by Duke’s specific combination of earnings growth, profit margin, risk, industry, and size. For Duke, this Fair Ratio is 22.15x. Since it incorporates more company-specific information than basic peer or industry averages, the Fair Ratio provides a more tailored picture of where the stock should trade.

Comparing Duke’s current PE ratio of 20.45x to the Fair Ratio of 22.15x shows a small gap. The absolute difference is well under 0.10, which means Duke is trading very close to its “fair” value by this measure.

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 Duke Energy Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. This feature makes it simple to tie together your own story about Duke Energy with your outlook for its future performance.

A Narrative is your personal investment view. Here, you connect what you believe about the company’s prospects to financial forecasts for revenue, earnings, and profit margins, ultimately arriving at your own fair value for the stock. This approach lets you move beyond static ratios and instead consider how unfolding business trends, regulations, and innovations might impact Duke’s value over time.

Narratives are accessible and easy to build for free on Simply Wall St’s Community page, where millions of investors use them to clarify their thesis and see how their outlook compares to others. As new news or earnings come in, Narratives update dynamically, so your assessment always keeps pace with reality.

For example, one user’s Narrative may forecast strong growth from grid modernization and a $132 price target, while another may remain cautious due to regulatory risks and set fair value at just $90. Narratives make these different stories and fair values visible, helping you decide whether to buy, hold, or sell by comparing your fair value with the current share price.

Do you think there's more to the story for Duke Energy? 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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