Duke Energy Corp Valuation – March 2019 #DUK

Company Profile (excerpt from Reuters): Duke Energy Corporation (Duke Energy), incorporated on May 3, 2005, is an energy company. The Company operates through three segments: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure, and Commercial Renewables. The Company operates in the United States through its direct and indirect subsidiaries. The Company’s subsidiaries include Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont).


Downloadable PDF version of this valuation:

ModernGraham Valuation of DUK – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $65,576,389,981 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 31.52% Fail
6. Moderate PEmg Ratio PEmg < 20 21.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $4.19
MG Growth Estimate 3.09%
MG Value $61.57
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $60.79
MG Value based on 0% Growth $35.64
Market Implied Growth Rate 6.51%
Current Price $90.20
% of Intrinsic Value 146.50%

Duke Energy Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.48 in 2015 to an estimated $4.19 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Duke Energy Corp revealed the company was trading above its Graham Number of $81.52. The company pays a dividend of $3.64 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.51, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-128.09.

Duke Energy Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$128.09
Graham Number $81.52
PEmg 21.51
Current Ratio 0.65
PB Ratio 1.48
Current Dividend $3.64
Dividend Yield 4.03%
Number of Consecutive Years of Dividend Growth 11

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,714,000,000
Total Current Liabilities $15,041,000,000
Long-Term Debt $50,788,000,000
Total Assets $145,392,000,000
Intangible Assets $19,303,000,000
Total Liabilities $101,558,000,000
Shares Outstanding (Diluted Average) 717,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.90
Dec2018 $3.76
Dec2017 $4.36
Dec2016 $3.11
Dec2015 $4.05
Dec2014 $2.66
Dec2013 $3.76
Dec2012 $3.07
Dec2011 $3.83
Dec2010 $3.00
Dec2009 $2.49
Dec2008 $3.21
Dec2007 $3.54
Dec2006 $4.71
Dec2005 $11.28
Dec2004 $4.62
Dec2003 -$4.44
Dec2002 $3.66
Dec2001 $7.32
Dec2000 $7.14
Dec1999 $6.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.19
Dec2018 $3.76
Dec2017 $3.70
Dec2016 $3.35
Dec2015 $3.48
Dec2014 $3.21
Dec2013 $3.40
Dec2012 $3.19
Dec2011 $3.24
Dec2010 $3.09
Dec2009 $3.77
Dec2008 $4.77
Dec2007 $5.01
Dec2006 $5.15
Dec2005 $5.08
Dec2004 $2.54
Dec2003 $2.32

Recommended Reading:

Other ModernGraham posts about the company

Most Undervalued Stocks of the S&P 500 – August 2018
Duke Energy Corp Valuation – May 2018 $DUK
Duke Energy Corp Valuation – February 2017 $DUK
Duke Energy Corporation Valuation – November 2015 Update $DUK
30 Companies in the Spotlight This Week – 11/15/14

Other ModernGraham posts about related companies

Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.