Latest news with #MGEEnergy
Yahoo
23-05-2025
- Business
- Yahoo
Is There An Opportunity With MGE Energy, Inc.'s (NASDAQ:MGEE) 36% Undervaluation?
MGE Energy's estimated fair value is US$139 based on 2 Stage Free Cash Flow to Equity Current share price of US$89.53 suggests MGE Energy is potentially 36% undervalued Our fair value estimate is 86% higher than MGE Energy's analyst price target of US$75.00 How far off is MGE Energy, Inc. (NASDAQ:MGEE) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. Our analysis will employ the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple! Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Our free stock report includes 2 warning signs investors should be aware of before investing in MGE Energy. Read for free now. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To start off with, we need to estimate the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$95.8m US$120.4m US$143.0m US$163.1m US$180.5m US$195.6m US$208.8m US$220.5m US$231.1m US$240.9m Growth Rate Estimate Source Est @ 35.29% Est @ 25.58% Est @ 18.79% Est @ 14.04% Est @ 10.71% Est @ 8.38% Est @ 6.75% Est @ 5.60% Est @ 4.80% Est @ 4.25% Present Value ($, Millions) Discounted @ 6.4% US$90.1 US$106 US$119 US$127 US$132 US$135 US$135 US$134 US$132 US$130 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$1.2b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 6.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$241m× (1 + 2.9%) ÷ (6.4%– 2.9%) = US$7.2b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$7.2b÷ ( 1 + 6.4%)10= US$3.8b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$5.1b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of US$89.5, the company appears quite good value at a 36% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at MGE Energy as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.4%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for MGE Energy Strength Earnings growth over the past year exceeded its 5-year average. Debt is well covered by earnings and cashflows. Weakness Earnings growth over the past year underperformed the Electric Utilities industry. Dividend is low compared to the top 25% of dividend payers in the Electric Utilities market. Opportunity Annual earnings are forecast to grow for the next 3 years. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by cash flow. Annual earnings are forecast to grow slower than the American market. Whilst important, the DCF calculation shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a discount to intrinsic value? For MGE Energy, we've compiled three additional factors you should further examine: Risks: You should be aware of the 2 warning signs for MGE Energy we've uncovered before considering an investment in the company. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for MGEE's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
20-05-2025
- Business
- Yahoo
MGE Energy, Inc. (MGEE): A Bull Case Theory
We came across a bullish thesis on MGE Energy, Inc. (MGEE) on Value Investing Subreddit Page by TickernomicsOfficial. In this article, we will summarize the bulls' thesis on MGEE. MGE Energy, Inc. (MGEE)'s share was trading at $89.71 as of May 14th. MGEE's trailing P/E was 25.34 according to Yahoo Finance. A utility employee connecting wires at a power station in order to distribute electricity to customers. MGE Energy (MGEE), a regulated utility based in Wisconsin, distinguishes itself through financial strength, disciplined capital allocation, and a resilient business model that contrasts sharply with industry peers often burdened by high debt, inflation-driven negative free cash flow, and regulatory pricing constraints. MGEE delivers essential electricity and natural gas services through deeply entrenched infrastructure, creating a durable economic moat supported by a stable, localized customer base and Wisconsin's solid economic environment. Its real asset-heavy profile gains further appeal in a weakening dollar environment, where the relative value of infrastructure increases and the inflation-adjusted cost of debt becomes more favorable. Unlike many utilities chasing ESG initiatives that fail to produce consistent returns, MGEE has remained focused on fundamentals, avoiding overreach while continuing to generate steady positive free cash flow—a rare achievement in the capital-intensive utility space. The company's strong balance sheet, reasonable leverage, and reliable dividend stream reinforce its role as a stabilizing force in any portfolio, particularly during periods of macroeconomic uncertainty or market volatility. Insider buying activity adds further credibility to the long-term value proposition, signaling confidence from those closest to the business. MGEE's low-risk core operations, coupled with prudent management and high-quality tangible assets, make it uniquely positioned to deliver both defensive protection and solid long-term returns. In a sector known for slow growth and operational drag, MGEE stands out as a utility that not only preserves capital but also offers compelling upside potential through its stable fundamentals and consistent performance. MGE Energy, Inc. (MGEE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held MGEE at the end of the fourth quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of MGEE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MGEE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey.
Business Wire
16-05-2025
- Business
- Business Wire
MGE Energy to Present at the 2025 AGA Financial Forum
MADISON, Wis.--(BUSINESS WIRE)--MGE Energy, Inc. (Nasdaq: MGEE), management will be presenting at the 2025 AGA Financial Forum on May 18, 2025. The presentation is available on MGE Energy's website at: 2025 AGA Financial Forum. About MGE Energy MGE Energy is an investor-owned public utility holding company headquartered in the state capital of Madison, Wis. It is the parent company of Madison Gas and Electric, which generates and distributes electricity in Dane County, Wis., and purchases and distributes natural gas in seven south-central and western Wisconsin counties. MGE Energy's assets total approximately $2.8 billion, and its 2024 revenues were approximately $677 million.
Business Wire
07-05-2025
- Business
- Business Wire
MGE Energy Reports First-Quarter 2025 Earnings
MADISON, Wis.--(BUSINESS WIRE)--MGE Energy, Inc. (Nasdaq: MGEE), today reported financial results for the first quarter of 2025. MGE Energy's GAAP (Generally Accepted Accounting Principles) earnings for the first quarter of 2025 were $41.6 million, or $1.14 per share, compared to $33.8 million, or $0.93 per share, for the same period in the prior year. Rate base investment growth and weather impacts drove our first-quarter results. MGE continues to invest in new, cost-effective renewable generation, which is helping to fuel the company's asset growth. An increase in electric investments included in rate base contributed to increased electric earnings for 2025. Darien solar project in Rock and Walworth counties became operational in March 2025, serving MGE electric customers with cost-effective, carbon-free energy. MGE owns 25 MW of solar capacity from the Darien Solar Project. Gas retail sales saw a significant increase of 19% in the first quarter of 2025, while electric retail sales rose by 3%. These changes occurred against a backdrop of relatively normal weather in the first quarter of 2025, compared to the milder conditions observed in the first quarter of 2024. About MGE Energy MGE Energy is a public utility holding company. Its principal subsidiary, Madison Gas and Electric, generates and distributes electricity to 167,000 customers in Dane County, Wis., and purchases and distributes natural gas to 178,000 customers in seven south-central and western Wisconsin counties. MGE's roots in the Madison area date back more than 150 years. Forward-looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are based on MGE Energy's current expectations, estimates and assumptions regarding future events, which are inherently uncertain. We caution you not to place undue reliance on any forward-looking statements, which are made as of the date of this press release. We undertake no obligation to revise or update publicly any such forward-looking statements to reflect any change in expectations or in events, conditions or circumstances on which any such statements may be based. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to our business in general, please refer to the "Risk Factors" sections in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission.
Yahoo
18-04-2025
- Business
- Yahoo
MGE Energy, Inc. (MGEE): Among the Low Profile Dividend Champions to Buy
We recently published a list of the 15 Low Profile Dividend Champions to Buy. In this article, we are going to take a look at where MGE Energy, Inc. (NASDAQ:MGEE) stands against other low profile dividend champions. Companies known as Dividend Aristocrats belong to the S&P Index and have raised their dividend payments every year for a minimum of 25 years. On the other hand, Dividend Champions have also maintained at least 25 straight years of dividend growth, though they may not be part of the broader market. It is possible to pursue a strategy that offers both income and growth. Companies that regularly increase their dividends—often referred to as dividend growers—are typically financially sound, well-managed, and of high quality. Over the long term, these businesses not only show lower levels of volatility but also tend to deliver better performance than the broader market, such as the S&P Equal Weight Index. According to a report by Guggenheim, companies that grew and initiated their dividends between May 2005 and December 2024 delivered an annual average return of 10.5%, compared with a 5.5% return of those companies that cut or eliminated their payouts during this period. The broader market produced a 10.4% return on an annual average basis, slightly underperforming the dividend growers. The report also mentioned that dividend growth strategies have generally shown strong performance in both rising and falling markets. For investors, this offers a chance to benefit from long-term market gains while also helping to preserve more value during inevitable market downturns. Dividend-paying stocks provided investors with a degree of stability during the volatile month of March, according to Bank of America, which highlighted several standout names during the market's rough patch. The firm noted that value and dividend-focused stocks performed well that month, as concerns over President Donald Trump's tariff policies unsettled the broader market. The firm's quant strategist, Nigel Tupper, said the following in an April 11 report. 'In March, as global equities fell -4.1% on concerns tariffs could increase and slow growth, the best performing global styles were Value and Dividends,' With investor demand for dividend stocks on the rise, many companies have been steadily increasing their payouts. A report from Janus Henderson revealed that global dividend payments reached an all-time high of $1.75 trillion in 2024, reflecting a 6.6% increase on an underlying basis. The overall headline growth was 5.2%, influenced by fewer one-off special dividends and a stronger US dollar. Out of 49 countries in the index, 17— including major contributors like the US, Canada, France, Japan, and China—set new records for dividend payments. Overall, 88% of companies worldwide either raised their dividends or maintained them throughout the year. Looking ahead, Janus Henderson forecasts that global dividends will rise by 5.0% on a headline basis in the coming year, reaching a new record of $1.83 trillion. Although the stronger US dollar is expected to weigh on headline growth, the underlying growth rate is projected to come in slightly higher, around 5.1%. A row of utility poles and power lines, showing the reach of the electric utility operations. Our Methodology: For this article, we scanned a list of Dividend Champions, which are companies that have raised their payouts for 25 consecutive years or more. From that list, we picked some lesser-known companies with sound financials and strong balance sheets and ranked them according to hedge funds having stakes in them, as per Insider Monkey's database of Q4 2024. At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (). Number of Hedge Fund Holders: 15 MGE Energy, Inc. (NASDAQ:MGEE) is an American utility holding company that produces and distributes electricity and natural gas. The company's earnings for the fourth quarter of 2024 came in at $22 million, up from $20 million in the same period last year. It has continued to expand its asset base by investing in new, cost-efficient renewable energy projects. The rise in electric earnings for 2024 was partly driven by increased electric investments added to the rate base. One key development was the completion of the Paris solar project in December 2024. Meanwhile, gas retail therm deliveries declined by about 4% compared to the previous year, largely due to warmer-than-usual weather throughout 2024. Gas consumption among commercial and industrial users also fell by roughly 4%, with residential usage seeing a similar decrease. MGE Energy, Inc. (NASDAQ:MGEE)'s revenues for the quarter came in at $171.4 million, which showed growth from $164.6 million. On January 17, MGE Energy, Inc. (NASDAQ:MGEE) declared a quarterly dividend of $0.45 per share, which was in line with its previous dividend. Overall, the company is close to becoming a Dividend King, having raised its payouts for 49 years in a row. The stock has a dividend yield of 1.97%, as of April 17. Overall, MGEE ranks 13th on our list of low profile Dividend Champions to invest in. While we acknowledge the potential of MGEE as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than MGEE but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the . READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at . Sign in to access your portfolio
