Why Hawaiian Electric Industries (HE) Is Back in Focus

Hawaiian Electric Industries (HE) has returned to investors’ radar after Jefferies reiterated an Underperform rating, as the utility pursues a phased $170 million revenue increase and advances a $100 million stockholder derivative lawsuit settlement.

At a share price of US$15.22, Hawaiian Electric Industries has seen a 23.74% 90 day share price return and a 39.38% 1 year total shareholder return. However, the 3 and 5 year total shareholder returns remain deeply negative, suggesting short term momentum against a weaker long term picture as investors weigh the recent revenue filing, legal settlement progress, and renewed analyst scrutiny.

If this mix of recovery and risk has your attention, it may be a good moment to broaden your search and check out 27 power grid technology and infrastructure stocks

With HE carrying a low value score of 3, trading at US$15.22 and sitting at an 11.14% premium to one intrinsic estimate and above the average analyst target, you have to ask: is this a genuine opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 27% Overvalued

At a last close of $15.22 versus a narrative fair value of $12.00, the most followed valuation view sees Hawaiian Electric Industries trading ahead of its modeled worth, based on a detailed set of growth, margin, and risk assumptions discounted at 7.48%.

Regulatory and legislative support for clean energy procurement, combined with expanded investments in grid resilience and decarbonization, positions the company to capitalize on rising demand for electricity from transportation electrification and policy driven renewables adoption, providing long term revenue tailwinds.

Curious what kind of revenue trajectory, margin rebuilding, and future earnings multiple are needed to support that $12.00 fair value with a higher discount rate baked in.

Result: Fair Value of $12.00 (OVERVALUED)

However, there is still meaningful wildfire litigation, along with higher mitigation and insurance costs, that could pressure margins and weaken the case for today’s valuation.

Another Angle On Valuation

The narrative fair value of US$12.00 paints Hawaiian Electric Industries as overvalued at US$15.22. However, the P/E of 21.3x sits just below both the Electric Utilities industry average of 21.5x and a fair ratio of 22.8x. This points to more muted valuation risk than the cash flow view suggests.

That kind of small gap can close in either direction, so the real question is whether you think the business eventually leans closer to the more cautious cash flow models or to what current earnings and peers are implying about its longer term potential.

Next Steps

With mixed views on value and risk running through this story, it makes sense to check the numbers yourself and decide quickly where you stand using 4 key rewards and 1 important warning sign

Looking for more investment ideas?

If HE has sharpened your thinking, do not stop here. Widening your search can reveal opportunities that better fit your return goals and risk comfort.

• Target potential mispricings by scanning a curated list of companies that look underappreciated on quality and valuation using the 63 high quality undervalued stocks.
• Strengthen your income stream by focusing on businesses with yields around 5% or higher and resilient payouts via the 12 dividend fortresses.
• Dial down portfolio risk by zeroing in on companies with sturdier financial profiles through the 65 resilient stocks with low risk scores.

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.