Edison International (EIX)
Utilities
Edison International is the holding company for Southern California Edison (SCE), a regulated electric transmission and distribution monopoly in Southern California with a guaranteed return on a rate base that grows ~7% annually. The market punishes the multiple well below the sector band (implied P/E ~11x vs. 15-18x typical for a utility) due to the January 2025 Eaton Fire litigation and the strict-liability risk for wildfires in California, even though the Wildfire Fund (AB 1054/SB 254) partially caps that exposure and the authorized ROE for 2026-2028 was set at 10.03%. With the core earnings trajectory normalized for the non-recurring 2025 recoveries, the business compounds at a mid-to-high single-digit rate on a multiple that already prices in litigation risk, leaving a margin of safety if the multiple partially converges toward the rest of the sector.
- Price
- $74.24
- Intrinsic value (5y, base)
- $121
- Total annual return (5y)
- 15.0%
- Status (nominal)
- Undervalued
- Margin of safety
- +36%
The essentials
- Regulated monopoly (SCE) with an authorized return of 10.03% on a $48.2bn rate base growing ~7%/year, funded by a $40.6bn capex plan for 2026-2030.
- The multiple trades well below the utility band (implied P/E ~11x vs. 15-18x) due to the Eaton Fire litigation (January 2025) and California's strict-liability wildfire risk.
- 2026 core EPS guidance reaffirmed on Jul 30, 2026 at $5.90-$6.20, with stated confidence in 5-7% annual core EPS growth through 2030.
Intrinsic value — two valuation methods
Total return at 5 years: 14.9%/year = 10.3% appreciation + 4.7% dividend. The target price ($121) is ex-dividend; the $21 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $176 · Multiples $115) exceeds the market price ($74).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $74 trades ~35.7% below its value discounted to today (~$115); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — Infravalorado: the target price ($121) plus dividends yield above the required average return (10%) — the business compounds.
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 ~$74.
Thesis
The business
A regulated monopoly of medium-to-high quality: a contractual return on a rate base growing ~7%/year, with revenue decoupling that insulates results from volume sold. The structural risk that distinguishes it from other utilities is California wildfire litigation, partially mitigated by the Wildfire Fund.
The valuation
Valued by P/E on normalized attributable net income (core, TTM rebased to Jun 30, 2026 from the Jul 30, 2026 8-K), with an exit multiple at the floor-to-midpoint of the utility band (12-17x depending on scenario, reference band 15-18x) reflecting litigation risk. The 5-year value stems from +15% of total return, split between multiple appreciation toward the rest of the sector and core earnings growth.
The margin of safety
The market price trades at an implied P/E of ~11x TTM core earnings, well below the 15-18x band of comparable utilities without material wildfire litigation. It trades at a real discount to value, though short of the required margin of safety. The verdict is Undervalued, with an estimated total return of +15% annually over 5 years.
What to watch
The central disconfirmer is the outcome of the Eaton Fire bellwether trial (January 2027) and the solidity of the Wildfire Fund: if courts extend liability beyond what the fund and the liability cap absorb, or if the fund is depleted by claims from other utilities, the multiple may fail to normalize and litigation-directed capital would compress the capex available to grow the rate base.
Educational / informational. Does not constitute investment advice.