Why Consolidated Edison (ED) is back in focus

Consolidated Edison (ED) is drawing fresh attention after recent share price moves, with the stock last closing at US$107.60 and showing mixed returns over the past month and the past 3 months.

At US$107.60, the recent 1-day share price gain of 1.13% and 7-day share price return of 3.98% come against a softer 90-day share price return. The 5-year total shareholder return of 68.10% highlights how longer term investors have been rewarded despite shorter term swings.

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With Consolidated Edison trading close to analysts’ price target and its value score sitting at 2, the key question is whether today’s price reflects fair value or if the market is already pricing in future growth.

Price to earnings of 18.4x: Is it justified?

On a P/E of 18.4x, Consolidated Edison trades slightly below the estimated fair P/E of 21.7x and just under the broader US market P/E of 18.7x.

The P/E ratio compares the current share price to earnings per share, so it effectively shows how much investors are paying for each dollar of earnings. For a regulated utility with steady earnings and cash flows, this ratio is a common yardstick for comparing valuation against peers and the wider market.

Here, the picture is mixed. Consolidated Edison screens as good value versus its fair P/E estimate of 21.7x and the peer average P/E of 21x, suggesting the market is pricing its earnings at a discount to where they could trade if sentiment or expectations shifted. At the same time, the stock screens as slightly expensive relative to the Global Integrated Utilities P/E average of 18.3x, so investors are not getting an outright bargain compared with the global sector, but are not paying a clear premium either.

Result: Price-to-earnings of 18.4x (ABOUT RIGHT)

However, you still need to factor in risks such as potential regulatory changes in New York and any shift in analyst expectations around earnings and fair value.

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Another view using cash flows

The SWS DCF model presents a more focused view, with Consolidated Edison trading at $107.60 compared with an estimated future cash flow value of $106.92, which suggests the stock is slightly overvalued on this measure. When price and cash flows sit this close together, which signal do you rely on more?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Consolidated Edison 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 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed signals on value and risk can make a stock like Consolidated Edison feel finely balanced, so act while the data is fresh and review the key 3 key rewards and 2 important warning signs

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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.