Duke Energy Corporation (DUK)
Servicios públicos / Electricidad y gas natural (generación, transmisión y distribución regulada, seis estados)
A regulated electric and natural gas utility across six states in the southeastern and midwestern United States: a territorial monopoly in most of its markets, an average authorized ROE of ~9.8% in recent rate cases, with two pending cases in North Carolina requesting 10.95% (effective January 2027). But at ~$122 the 5-year base return runs ~$141 (+3%/year in price, +7% with the dividend): Fairly valued — a business with a solid regulatory moat, trading in line with the premium utility group.
- Price
- $121.56
- Intrinsic value (5y, base)
- $141
- Total annual return (5y)
- 6.5%
- Status (nominal)
- Fairly valued
- Margin of safety
- +9%
The essentials
- A regulated utility with two businesses of the same nature (no sum-of-the-parts by business type): Electric Utilities and Infrastructure (EU&I, ~92% of segment revenue) serves ~8.7 million electric accounts in North Carolina, South Carolina, Florida, Ohio, and Indiana; Gas Utilities and Infrastructure (GU&I, ~9%) serves ~1.8 million natural gas accounts in the Carolinas, Ohio/Kentucky, and (until the sale to Spire closes, expected March 31, 2026) Tennessee.
- The engine is the expansion of the regulated rate base: attributable net income jumped sharply between FY2023 and FY2024 (+59%, well above the revenue and EBIT growth of the same period, with no specific cause identified in the extracted material) and grew +9.8% in FY2025; the projected path does not extrapolate that jump (§5 R1) and instead anchors on the adjusted earnings growth that Duke Energy does guide to the market (+6.9% in 2025, from $5.90 to $6.31) and on the revenue trajectory, which is cleaner and accelerating (+4.8% FY24, +5.6% FY25, +5.8% TTM).
- At ~$122 it trades at ~19.5× trailing-twelve-month attributable net income — in line with the premium regulated utility group (Southern (SO) trades at a similar forward multiple), below NextEra but above the industry's simple average. The base return (+7% total) hinges on whether that multiple holds while growth decelerates toward the band of a regulated utility: Fairly valued.
Intrinsic value — two valuation methods
Total return at 5 years: 6.6%/year = 3.0% appreciation + 3.6% dividend. The target price ($141) is ex-dividend; the $23 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $195 · Multiples $133) exceeds the market price ($122).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $122 trades ~8.8% below its value discounted to today (~$133); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($141) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$85.
Thesis
The business
Duke Energy is a regulated electric and natural gas utility with a solid regulatory moat: a monopoly in most of its territories (except for competitive electric supply in Ohio), an average authorized ROE of ~9.8% in recent cases, margin-stabilization mechanisms in most jurisdictions, and a nuclear fleet (11 reactors) that is difficult to replicate. Two pending rate cases in North Carolina request a 10.95% ROE, effective January 2027.
The valuation
A utility is valued on P/E over attributable net income, with value anchored to the growth of the regulated rate base. For Duke Energy, attributable net income ($5,139M TTM, XBRL) and adjusted earnings (non-GAAP, $6.31 FY2025) sit close to each other — unlike a utility with a large-scale unregulated renewables arm, where the mark-to-market adjustment can be sizable — so attributable net income is a reliable base without needing a major adjustment. The path normalizes the +59% jump in FY2024 net income (not attributable to any cause identified in the extracted material, and well above the revenue/EBIT growth of the same period): it starts at ~7.0% — close to the guided adjusted-earnings trajectory (+6.9% in 2025) and to accelerating revenue (+5.6% FY25, +5.8% TTM) — decelerating to ~5.0% by year 5, with the multiple compressing from ~19.5× today to ~16.5× (within the band for a regulated utility, 15-18×) → ~$141/share → price CAGR +3%, +7% with the dividend (3.6%).
The margin of safety
It trades close to intrinsic value, far from the required margin of safety. The base return (+7% total: +3%/year in price and +4% from dividends) is measured against the average return on equities (~10%, the method's bar). The verdict is Fairly valued: a business with a real and predictable regulatory moat, trading in line with the premium regulated utility group (Southern (SO) trades at a similar forward multiple) — neither at an evident discount nor at a marked premium. The dividend (target payout 60-70% of adjusted EPS, +2%/year, 99 consecutive years paid) contributes a stable and growing portion of total return.
What to watch
Three things. The resolution of the two pending rate cases in North Carolina (10.95% ROE requested, effective only January 2027): if approved with material cuts, the regulated return of Duke's largest market suffers. That net-income growth normalizes without the one-time FY2024 jump — the next fiscal year without that boost is the real test of the trajectory. And execution of the combined capital plan (>$58,000 million 2026-2028), including data-center interconnection and completion of the sale of the Tennessee business to Spire (closing expected March 31, 2026), which would reduce the need for equity issuance in the near term.
Educational / informational. Does not constitute investment advice.