Has FirstEnergy’s Strong Multi Year Runway Left Much Upside for Investors in 2025?

• If you are wondering whether FirstEnergy is still a smart buy after its long run, or if the easy money has already been made, you are in the right place to unpack what the current price really implies.
• Despite a recent soft patch, with the stock down 1.4% over the last week and 3.7% over the last month, FirstEnergy is still up 10.9% year to date, 14.5% over 1 year, 22.6% over 3 years, and 79.4% over 5 years.
• Recent moves reflect a mix of shifting sentiment around regulated utilities generally and company-specific headlines, including ongoing grid modernization initiatives and regulatory developments in its key operating regions. Together, these factors have nudged expectations around FirstEnergy's long-term cash flows and risk profile, which the market is now trying to reprice.
• Under our framework, FirstEnergy scores a 2/6 valuation check, suggesting pockets of undervaluation but not a clear, across-the-board bargain. Below, we walk through what different valuation approaches indicate and then return at the end to a broader way of thinking about what the stock may really be worth.

FirstEnergy scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: FirstEnergy Dividend Discount Model (DDM) Analysis

The Dividend Discount Model estimates what a stock is worth by projecting all future dividend payments and discounting them back to today. It is especially useful for mature, income focused utilities like FirstEnergy.

For FirstEnergy, the model uses an annual dividend per share of about $1.93, supported by a return on equity of roughly 9.1%. However, the payout ratio is extremely high at around 99%, which leaves almost no earnings being reinvested into the business. As a result, the implied long term dividend growth rate is close to flat at just 0.07%, based on the formula that multiplies retained earnings by return on equity.

Feeding these inputs into the DDM produces an intrinsic value of about $28.01 per share. Compared with the current market price, this suggests the stock is roughly 58.0% overvalued on a dividend only basis. In other words, investors today appear to be paying a premium for FirstEnergy that is hard to justify from its slow growing dividend stream alone.

Result: OVERVALUED

Our Dividend Discount Model (DDM) analysis suggests FirstEnergy may be overvalued by 58.0%. Discover 904 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 FirstEnergy.

Approach 2: FirstEnergy Price vs Earnings

For a profitable utility like FirstEnergy, the price to earnings (PE) ratio is a practical way to gauge how much investors are willing to pay for each dollar of current earnings. It ties directly to the company’s bottom line, which is especially relevant for mature, dividend paying businesses.

In general, companies with stronger growth prospects and lower perceived risk can justify a higher PE, while slower growing or riskier names should trade at a discount. FirstEnergy currently trades on a PE of about 19.2x, slightly below the Electric Utilities industry average of roughly 20.0x and above the peer group average of around 15.6x. This suggests the market ascribes it a modest quality premium over peers, but not over the sector overall.

Simply Wall St’s proprietary Fair Ratio for FirstEnergy is 23.4x. This represents the PE you would expect given its specific mix of earnings growth, industry position, profit margins, market cap and risk factors. This is more tailored than a simple peer or industry comparison because it adjusts for the company’s own fundamentals rather than assuming it should trade like an average utility. With the current PE of 19.2x sitting below the Fair Ratio of 23.4x, the multiple based view points to FirstEnergy being somewhat undervalued.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1444 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your FirstEnergy Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of FirstEnergy’s business to a concrete forecast for its future revenues, earnings and margins, and then to a Fair Value you can compare to today’s share price.

A Narrative on Simply Wall St’s Community page is your story behind the numbers, where you spell out why you think grid modernization, regulatory support, capital intensity or interest rates will play out a certain way, and the platform translates that into a dynamic financial model and Fair Value estimate.

Because Narratives update automatically when new information like quarterly earnings, guidance changes or major project announcements hit the news, they help you quickly see whether the gap between Fair Value and price still supports buying, holding or selling.

For example, one FirstEnergy Narrative might assume robust demand from data centers, rising margins and a Fair Value of about $50 per share. In contrast, a more cautious Narrative could focus on regulatory and financing risks, use lower growth and margin assumptions, and arrive at a meaningfully lower Fair Value, showing how two investors looking at the same company can reach very different but clearly reasoned decisions.

Do you think there's more to the story for FirstEnergy? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com