New Mexico regulators have approved Southwestern Public Service Co., an Xcel Energy (XEL) subsidiary, to invest about US$9.38b in 3.8 GW of new utility-owned generation, as well as a delayed retirement of the Tolk coal plant.

At a share price of US$80.78, Xcel Energy has delivered an 8.17% year to date share price return and a 19.38% total shareholder return over the past year. This suggests momentum has been improving as regulators back large scale investment plans and shareholders recently reaffirmed the existing board and dividend.

If you are thinking about how this kind of utility build out could intersect with other power-related opportunities, it may be worth scanning 35 power grid technology and infrastructure stocks

With the stock up 19.38% over the past year and trading at US$80.78, plus a quarterly dividend of US$0.5925 per share, are you looking at an underappreciated utility, or has the market already priced in future growth?

Most Popular Narrative: 12.4% Undervalued

Against the last close of $80.78, the most followed narrative places Xcel Energy’s fair value at $92.17, framing the recent New Mexico approval inside a larger grid and clean energy build out story.

Policy-driven decarbonization and climate measures are accelerating demand for wind, solar, and storage projects, with Xcel's aggressive clean energy buildout (aiming for over 80% carbon-free generation by 2030) supporting long-term regulated asset base expansion and sustained earnings growth.

Curious what kind of revenue mix, margin uplift, and future P/E the narrative leans on to reach that fair value? The assumptions behind those targets, including how much growth is expected from data center demand and grid investment, sit at the core of this story.

Result: Fair Value of $92.17 (UNDERVALUED)

However, you also need to weigh the risk that more than US$15 billion of extra capital plans, wildfire liabilities, and any regulatory pushback on rate cases could pull this story off track.

Another Way To Look At Value

Analysts see Xcel Energy as undervalued on earnings, with a P/E of 24.1x versus an estimated fair ratio of 26.7x, even though it trades above the Simply Wall St future cash flow estimate of US$71.25 per share. When cash flows and earnings disagree like this, which signal matters more for you?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Xcel Energy 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

The mix of optimism and concern around Xcel Energy is clear. Move quickly, review the numbers yourself, and weigh the 2 key rewards and 3 important warning signs

Looking for more investment ideas?

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• Spot potential high yield anchors for your portfolio with 10 dividend fortresses that pair income with resilience.
• Zero in on quality companies priced below what their fundamentals suggest by scanning 46 high quality undervalued stocks before the crowd catches on.
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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.