PPL Corp (PPL): Has Recent Momentum Cooldown Opened a Valuation Opportunity for Income Investors?

PPL (PPL) has quietly outperformed the broader utilities sector over the past year, with the stock up about 9% and roughly 30% over the past 3 years, rewarding patient income-focused investors.

See our latest analysis for PPL.

At a share price of $34.26, PPL’s recent 1 month share price return of minus 6.8% contrasts with its solid 1 year total shareholder return of 9.4%. This suggests momentum has cooled slightly after a strong multi year run.

If PPL’s steady utility profile appeals to you, it could be worth exploring other income friendly opportunities like pharma stocks with solid dividends to see where else the market might be rewarding patient shareholders.

With earnings and dividend growth trending higher and shares still trading below analyst targets, the key question now is whether PPL remains undervalued or if the market is already pricing in the next leg of growth.

Most Popular Narrative: 15.3% Undervalued

With PPL last closing at $34.26 versus a narrative fair value of about $40.47, the current share price sits meaningfully below that implied level.

The accelerating growth in data center construction and new economic development (particularly in Pennsylvania and Kentucky) is driving unprecedented electricity demand, positioning PPL for outsized long-term rate base and revenue growth as it invests to serve these large new loads.

Major planned grid infrastructure upgrades and generation capacity expansions, totaling $20B through 2028 (with upside from potential data center driven transmission and new generation projects), set the stage for nearly 10% average annual rate base growth directly supporting higher regulated revenues and future earnings.

Read the complete narrative.

Curious how steady, utility like demand justifies a premium style valuation multiple, while still leaning on moderate growth assumptions and stable margins, not hyper growth fantasy?

Result: Fair Value of $40.47 (UNDERVALUED)

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

However, that upbeat outlook could be challenged if regulators push back on PPL’s $20 billion capex plan, or if data center demand grows more slowly than expected.

Find out about the key risks to this PPL narrative.

Another Angle on Valuation

Our DCF model paints a cooler picture than the narrative fair value, putting PPL’s intrinsic value closer to $27.23 a share, which makes today’s $34.26 price look overvalued. If the cash flows disappoint, could the share price drift back toward that level?

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 PPL 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 908 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 PPL Narrative

If you see the story differently or would rather rely on your own homework, you can build a personalized view in just a few minutes: Do it your way.

A great starting point for your PPL 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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