EXC Exelon
Regulated utility earning allowed returns with grid capex growth — price dip widens margin of safety.
The story
Exelon is the largest regulated electric and gas utility in the U.S., serving major metro markets in Illinois and the Mid-Atlantic through its six distribution utilities. Trailing ROE of 9.7% sits squarely within the allowed-return range for regulated utilities, and rate-base capex is driving steady book and revenue growth. The stock has drifted lower since the prior take, widening the margin of safety without any fundamental deterioration.
No material change since prior take: trailing ROE of 9.7% aligns with allowed regulatory returns and is held as normalized. Book growth of 6.2% near-term reflects robust rate-base capex across service territories, tapering to 4% terminal — below the 4.67% risk-free rate. Beta anchored at industry level; failure probability remains negligible for a regulated utility with investment-grade credit.
Value drivers
| Return on equity (normalized) | 9.7% |
| Book-value growth (Y1) | 6.2% |
| Terminal book growth | 4.0% |
| Beta | 0.55 |
| Failure probability | 0.4% |
| Cost of equity | 7.1% |
Valuation bridge
| PV of excess returns | 6.39B |
| PV of terminal excess | 17.03B |
| Equity value | 52.01B |
| ÷ shares → per share | $50.48 |
News
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- Exelon (EXC) Stock Looks Below Fair Value on Current Earnings
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 28.80B | 9.7% | 735.21M | 686.17M |
| 2 | 30.58B | 9.7% | 780.80M | 680.11M |
| 3 | 32.39B | 9.7% | 826.99M | 672.30M |
| 4 | 34.22B | 9.7% | 873.57M | 662.79M |
| 5 | 36.05B | 9.7% | 920.30M | 651.67M |
| 6 | 37.87B | 9.7% | 966.92M | 639.01M |
| 7 | 39.68B | 9.7% | 1.01B | 624.90M |
| 8 | 41.47B | 9.7% | 1.06B | 609.46M |
| 9 | 43.22B | 9.7% | 1.10B | 592.77M |
| 10 | 44.92B | 9.7% | 1.15B | 574.98M |
Key risks
- Regulatory lag or adverse rate orders in Illinois or Maryland compress allowed returns below 9.7%
- Affordability pressure from rising customer bills could politicize rate cases and cap capex recovery
- Interest-rate spikes raise cost of debt and equity, narrowing excess returns on growing rate base
Catalysts
- Favorable multi-year rate-case outcomes in Illinois and Mid-Atlantic jurisdictions
- Accelerated grid-modernization and electrification capex driving above-trend rate-base growth