Why Hawaiian Electric Industries (HE) is on investors’ radar

Hawaiian Electric Industries (HE) has drawn fresh attention after recent share price moves, with the stock up 3.0% on the day but down over the past month and past 3 months.

At a share price of $13.57, Hawaiian Electric Industries has seen its 1 month share price return fall 11.13%, while the year to date share price return is 7.44% and the 1 year total shareholder return is 26.23%. This suggests recent momentum has cooled after a stronger rebound from last year’s lows.

If you are comparing Hawaiian Electric Industries with other power and grid focused businesses, it can be helpful to scan a wider peer group using the 33 power grid technology and infrastructure stocks

With Hawaiian Electric Industries trading near its analyst price target and recent returns mixed, the key question is whether today’s valuation underestimates future earnings power or if the stock already reflects the growth investors are hoping for.

Most Popular Narrative: 1% Undervalued

Hawaiian Electric Industries closed at $13.57, slightly below the narrative fair value of $13.75, which centers on policy support, wildfire liabilities, and grid investment.

Recent Hawaii legislation enabling wildfire liability caps, state funding for settlements, and securitization of wildfire safety investments significantly reduces legal and financial risk exposure while supporting large-scale infrastructure upgrades, which is likely to stabilize earnings and improve net margins.

Want to see what sits behind that legal and infrastructure story? The core of this narrative is how earnings, margins, and valuation all tie back to one set of forward looking assumptions.

Result: Fair Value of $13.75 (ABOUT RIGHT)

However, this depends on wildfire litigation and mitigation costs not proving more severe than expected, and on future debt needs not reducing the company’s financial flexibility.

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Another View: DCF Sends a Very Different Signal

While the analyst fair value sits at $13.75, our DCF model points to a very different picture, with an estimated future cash flow value of $3.56 per share. That gap suggests meaningful valuation risk based purely on cash flow assumptions. Which story do you trust more, earnings or cash flows?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Hawaiian Electric Industries 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 46 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

With sentiment clearly split between upside potential and downside risk, this is the moment to look through the data yourself and decide where you stand. To balance that view, take a closer look at the 4 key rewards and 1 important warning sign

Looking for more investment ideas?

If Hawaiian Electric Industries has sharpened your focus, do not stop here. Widen your research and compare it with other opportunities that may better fit your style.

• Kick off a hunt for companies priced below what their fundamentals suggest by checking the 46 high quality undervalued stocks.
• Prioritise resilience by reviewing the 63 resilient stocks with low risk scores and see which stocks score well on downside protection.
• Seek out underfollowed opportunities with solid metrics using the screener containing 22 high quality undiscovered gems before others catch on.

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.