NextEra Energy (NEE): Is the Recent Rebound Justified by Its Valuation?

NextEra Energy (NEE) has been quietly grinding higher, with the stock up about 4% over the past month and nearly 20% in the past 3 months, drawing fresh attention from income and growth investors.

See our latest analysis for NextEra Energy.

That move fits into a stronger rebound story, with NextEra’s share price delivering a solid double digit year to date return, while its five year total shareholder return underscores steady, income backed compounding for long term holders.

If this kind of steady climb appeals to you, it could be worth exploring healthcare stocks as another way to uncover resilient, long term compounders in a very different part of the market.

With shares now hovering just below analyst targets and trading at a premium to some traditional utilities, the key question is whether NextEra is still mispriced or if the market is already banking on years of growth.

Most Popular Narrative Narrative: 6.6% Undervalued

With NextEra Energy last closing at $84.95 versus a most popular narrative fair value of $91, the story hinges on sustained growth and resilient margins.

Declining costs and rapid deployment timelines of renewables (solar, wind, and especially battery storage), along with NextEra's unrivaled supply chain and perpetual construction capabilities, allow the company to extract significant pricing and operational advantages over competitors, helping to expand margins and accelerate earnings as cost pressures mount elsewhere in the sector.

Read the complete narrative.

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Result: Fair Value of $91 (UNDERVALUED)

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

However, persistent high interest rates and tighter permitting for large renewable projects could squeeze returns and slow the growth that underpins this bullish narrative.

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

Another Way to Look at Valuation

Not everyone agrees that NextEra is modestly undervalued. On a price to earnings basis it trades at 27.2 times earnings, richer than both peers at 24.7 times and the US utilities average at 20.2 times, though still below a fair ratio of 29.5 times.

That leaves investors weighing a smaller upside against a real risk of de rating if growth underwhelms, especially with rates and regulation in flux. Which side of that trade would you rather be on?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own NextEra Energy Narrative

If you are not fully convinced by this take or simply prefer digging into the numbers yourself, you can build a custom view in minutes, Do it your way.

A great starting point for your NextEra Energy research is our analysis highlighting 1 key reward 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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