Evergy, Inc. (EVRG)

Total return at 5 years: 4.4%/year = 0.5% appreciation + 3.9% dividend. The target price ($84) is ex-dividend; the $16 in dividends collected over 5 years are added separately.

The methods disagree: one places the value today above the price ($82) and the other below.

Today — expensive, no margin of safety: at $82 trades ~0.3% above its value discounted to today (~$82); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — En valor: the target price ($84) 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 falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$53.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($82) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-0.3%/year) than we project (6.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.9 bn of owner earnings in year 5 (vs ~$1.2 bn of our base case). It recalculates if the DCF assumptions are edited.

A regulated utility is valued on P/E over adjusted earnings (equity-level): the value sits in the regulated base (rate base), which grows with capex at an allowed ROE. GAAP can be depressed by the mark-to-market of hedges → the adjusted figure is used. It returns capital via dividend (a dividend aristocrat); it may issue some equity to fund capex. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Evergy is a holding company of 100% regulated utilities in Kansas and Missouri (Evergy Kansas Central, Evergy Metro, and Evergy Missouri West), with no exposure to deregulated markets. The engine of the thesis is a $21.6bn capital plan (2026-2030) to serve large-load (data center and AI) demand with ~1,900 MW of projected peak, which expands the rate base and, therefore, allowed earnings. The path starts from the guidance reaffirmed in the August 6, 2026 8-K: 2026 adjusted EPS of $4.14-4.34 (midpoint $4.24) and annual adjusted EPS growth of 6-8%+ through 2030, accelerating above 8% from 2028. It is modeled on GAAP (not adjusted) net income at the same guided EPS growth rate, adding the expected dilution from equity issuance (~2.5%/year) to fund the plan without over-leveraging the balance sheet — consistent with the 52% equity of Evergy Metro's rate-case capital structure. Year 5 decelerates toward the durable utility band (3-6%, §5 R2) because the company's explicit horizon runs through 2030. Today's earned ROE (~9.4%) runs below the ROE allowed in Kansas (9.7% Kansas Central, 9.4% Metro-Kansas) due to regulatory lag — Missouri still has no explicit ROE in its current orders, with a pending case requesting 10.5%.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $84 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $82, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $84 in 5 years plus $16 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $82. Against the current market price ($82), the margin of safety is -0.3% (trades above the maximum → a premium is paid) and the total return at that price would be 4.4% annually.

• Entry multiple. P/E in line with comparable regulated utilities, without the typical premium for a growth story explicitly accelerated and guided by management.
• Dividend yield. ~3.4% today, growing at a moderate pace (~5-5.5%/year), a meaningful component of the expected total return.
• Sensitivity to the exit multiple. The verdict is sensitive to whether the market eventually rewards the guided growth pace with a higher multiple, or whether execution risk keeps the multiple at the midpoint of the band.
• Asymmetry of the adverse scenario. The bear scenario carries both slower growth and a compressed multiple, reflecting that regulatory and execution risk affects both pieces of the valuation at once.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (100%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Free cash flow is structurally negative across the entire projection horizon due to the capital plan — normal in an investment phase, but it limits short-term financial flexibility.
• Sustained ROIC. Level ROIC ~6.4% on total invested capital, below the 10% bar — typical of a regulated utility whose return is calibrated on equity, not on consolidated capital.
• Reinvestment runway. The $21.6bn plan offers a long and visible reinvestment runway through 2030, with a regulated return on each additional dollar invested (subject to regulatory lag).
• Accounting distortions. GAAP EPS diverges from adjusted EPS due to identifiable, disclosed items (loss on the convertible-note repurchase, impairment of clean-energy investments) — there is no evidence of aggressive estimate manipulation.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Evergy does not report volume × price drivers in the sense of a transactional business: the business is 100% regulated capacity, so the relevant drivers are the capital plan (which determines rate-base growth and, with regulatory lag, allowed earnings) and how that plan is funded (debt and share dilution). The guided $21.6bn plan (2026-2030) is explicitly disclosed by year and represents nearly double the historical capex pace (~$2.3bn/year through FY24), reflecting the company's pivot toward serving large-load demand.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-mar-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Growth guidance. 6-8%+ annual adjusted EPS growth through 2030, accelerating above 8% from 2028 — well above the typical growth of a mature utility (3-6%).
• Source of growth. Concentrated in large-load (data center) demand and transmission expansion, both with regulatory lag in rate recovery.
• Sustainability beyond 2030. The company's explicit guidance does not extend beyond 2030; the method assumes deceleration toward the durable utility band (3-6%) by year 5 of the model.
• Dilution as the counterpart of growth. Net-income growth does not translate one-to-one into EPS growth: ~2.5%/year of estimated dilution from equity issuance reduces the effective per-share growth.

• Recurrence and predictability. Inelastic electricity demand and a territorial monopoly guarantee highly predictable revenue over the long run, though the exact level of earnings depends on the regulatory calendar.
• Structural pricing power. Evergy does not set price freely — the regulator does; 'pricing power' is indirect, via the ability to justify prudent investment before KCC/MPSC.
• Operating leverage. Moderate: for every point of revenue growth, operating income grows somewhat faster as investment already made is consolidated into rates.
• Recession behavior. Residential and commercial electricity demand is defensive; the relevant cyclical risk for Evergy is more regulatory and capex-execution risk than macroeconomic demand risk.
• Concentration of demand in large loads. The growth pipeline depends heavily on a limited number of data-center agreements, an execution-risk concentration that did not exist before this cycle.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Regulated return (earned vs allowed ROE)Earns 9.4% vs allowed 9.6%
• !Value creation (allowed ROE − 10% bar)-0.4pp
• ✓Leverage (net debt / EBITDA)4.9x · Investment grade (a floor committed under a debt covenant: BBB- S&P Global Ratings / Baa3 Moody's, below which the Missouri and Kansas subsidiaries committed not to pay dividends to the holding company)
• ✓Predictability (% regulated + rate-base growth)98% regulated · rate base +$21.6 bn/year

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Net debt/EBITDA ~4.9x, elevated but consistent with a utility in an intensive investment phase funded to a target capital structure of 52% equity.
• Credit rating. Investment grade, with an explicit debt covenant that bars subsidiaries from paying dividends to the holding company if the rating falls below BBB-/Baa3.
• Cash liquidity. Minimal cash on hand ($18.4 million), typical of a utility that manages liquidity via committed credit lines and continuous access to capital markets rather than a cash balance.
• Holding-company structure. Evergy depends on dividends from its regulated subsidiaries to meet its own financial obligations, subject to each subsidiary's capitalization and rating restrictions.
• Need for continuous external funding. The $21.6bn plan requires sustained access to debt and equity; an adverse capital-markets window would raise the cost of funding the entire plan.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Alignment. No controlling or founder shareholder; modest director and executive ownership (~0.3%), alignment via compensation tied to regulatory and execution KPIs.
• Capital allocation. Disciplined reinvestment in a regulated rate base with a return guaranteed by regulatory design, funded with a balanced mix of debt and equity, no opportunistic buybacks or diversifying M&A.
• Candor in communication. Explicitly acknowledges in its own filings the risk that large-load demand may not materialize, rather than presenting it as certain.
• Track record of meeting guidance. Reaffirmed 2026 adjusted EPS guidance in each recent release, with no cuts or material surprises.

• Partial motivated sellers: GAAP EPS for 2025 and the part of 2026 already reported is depressed by non-recurring items (loss on the convertible-notes repurchase, a $48.7 million impairment on early-stage clean-energy investments) that the market may be reading, in part, without fully distinguishing from the recurring adjusted EPS the company guides to and on which the thesis is calibrated.
• Partial missing buyers: continued share dilution from equity issuance (~2.5%/year estimated) to fund the capital plan is a known overhang on the stock that may limit buyer appetite until execution of the large-load pipeline is more proven.
• The utility sector overall trades with sensitivity to interest rates; a high-rate environment compresses the relative multiple of the entire comparable group, without this being a signal specific to Evergy.

There is no dramatic, isolated source of discount: Evergy trades in line with what its own business, quality, and growth pace suggest for a regulated utility in expansion — the margin of safety in the thesis depends more on the large-load plan's execution holding up than on a large gap between perception and reality today.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at ~0%/year (-2% total): the margin of safety protects the downside. The bull (+9%/year, +52% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Execution of large-load demand. The entire capital plan is conditioned on data-center demand materializing and being sustained as projected; the filing itself discloses this as a material risk.
• Regulatory lag. Earned ROE runs below the allowed level in Kansas, and Missouri has no explicit ROE in current orders, with a PISA ceiling that limits the speed of rate recovery for capex.
• Stranded assets in coal generation. Retirement or conversion of coal units is subject to regulatory prudence review; an unfavorable determination would prevent recovery of the investment already made.
• Concentration in the Wolf Creek nuclear plant. The sole nuclear unit (94% indirect stake); a prolonged outage or decommissioning costs above what is estimated would generate non-recoverable costs.
• Severe weather and wildfires. Exposure to storms, tornadoes, and wildfires that directly affect restoration costs and, potentially, legal liability despite Kansas's mitigating legislation.
• Cost of funding the capital plan. A deterioration in capital-market conditions or in the credit rating would raise the cost of funding the entire $21.6bn plan, with a direct effect on net return to shareholders.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROE 9% does not clear the 10% bar (regulated return by design).

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a PEG of 3.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -0% vs our 7%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -5%/yr, bull-scenario ceiling +5%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, cost advantage, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -0%, within what we project (7%) — the story squares with the numbers.