• If you are wondering whether Consolidated Edison at around US$106.87 is offering fair value right now, it helps to start with how the stock has actually behaved for investors.
• The share price is up 6.9% year to date, even though it has seen a 1.8% decline over the last week and a 6.8% decline over the last month. The 1 year return sits at a small 0.5% decline and the 5 year return at 63.6%.
• Recent news coverage has focused on Consolidated Edison within the broader utilities conversation, including how regulated utilities respond to changing capital costs and ongoing infrastructure investment needs. These themes often influence how investors view risk and required returns. That, in turn, can feed into short term share price moves for the stock.
• Simply Wall St currently gives Consolidated Edison a valuation score of 2 out of 6. The next step is to walk through what different valuation methods say about that score and then look at a more complete way to think about value that will come at the end of this article.

Consolidated Edison scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Consolidated Edison Dividend Discount Model (DDM) Analysis

The Dividend Discount Model looks at the value of a stock by projecting all future dividends and discounting them back to today, so it is very focused on the income the company pays out to shareholders.

For Consolidated Edison, the model uses a current annual dividend per share of about US$3.80, a return on equity of 8.58% and a payout ratio of about 58%. Simply Wall St caps the long term dividend growth rate at 3.54%, with an expected growth figure of 3.59%, to keep the assumptions conservative.

Running these inputs through the DDM produces an estimated intrinsic value of about US$106.50 per share. With the stock trading around US$106.87, the model implies the shares are roughly 0.3% overvalued. This is effectively in line with the current market price rather than pointing to a major mispricing.

Result: ABOUT RIGHT

Consolidated Edison is fairly valued according to our Dividend Discount Model (DDM), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Consolidated Edison Price vs Earnings

For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. It ties the share price directly to the earnings that support dividends and potential reinvestment, which is especially relevant for established utilities like Consolidated Edison.

What counts as a "fair" P/E depends on how investors view the stock's growth prospects and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually point to a lower, more conservative multiple.

Consolidated Edison currently trades on a P/E of 19.46x. That sits close to the Integrated Utilities industry average of 18.95x and the peer average of 19.65x, so the stock is broadly in line with its sector on this basic comparison.

Simply Wall St also uses a Fair Ratio, which in this case is a P/E of 23.53x. This is a proprietary estimate of what the P/E might be given factors like earnings growth, industry, profit margin, market cap and key risks. Because it blends these company specific inputs, it can give a more tailored view than simple peer or industry comparisons.

With the current P/E of 19.46x sitting below the Fair Ratio of 23.53x, this framework points to the stock trading below that derived fair value range.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Consolidated Edison Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as a simple way for you to set out your own story for Consolidated Edison and then link that story to a financial forecast and a fair value, all within Simply Wall St's Community page where millions of investors share their views.

A Narrative lets you outline your assumptions about future revenue, earnings and profit margins. The platform then turns those inputs into a forecast and a fair value estimate that you can compare directly with the current share price to decide whether the stock looks attractive, fully valued or expensive based on your own criteria.

Narratives on Simply Wall St are refreshed as new information such as earnings reports or news is added. This allows your fair value estimate to stay aligned with the latest data without you having to rebuild a spreadsheet each time, which makes the process accessible even if you are not a professional analyst.

For example, one Consolidated Edison investor might use a higher fair value based on expectations for regulated returns and infrastructure spending, while another might use a lower fair value based on more cautious assumptions about costs and future earnings.

Do you think there's more to the story for Consolidated Edison? Head over to our Community to see what others are saying!

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.