6% Yield And 52 Week Low! | MASSIVE Upside For National Grid (NGG) Stock! | NGG Stock Analysis! |

today we're looking at the Utilities Company National Grid it is trading towards its 52 we low this is a company with a yield of nearly 6% and a lot of upside as we're about to understand in today's episode we can see a buy rating from Wall Street but quite contradictory with the other two we have a sell from Seeking Alpha and a hold from Quant as always we are going to do a deep dive into this company and one of the things we will touch upon is that dividend safety score that we can at a borderline safe level we'll also take a look at the institutions who continue to be buying shares of this company within their own portfolio and we'll look at the Deep dive of the numbers their Topline Revenue growth as well as their bottom line net income whilst also looking at the health of the company which is very important for a company that does pay a high yield with a borderline safe score total cash versus total debt as we always do on the channel and ultimately we will run it through the valuation model where we do see some very nice upside getting to the intrinsic value given our acceptable Buy price as well as looking at our investor margin of safety and also look towards Wall Street to see what they're forecasting for the next 12 months so let's jump straight into this Utilities company and what we can see on a forward P this company is trading around 13.3 just for perspective S&P around 22 at the moment over the last year it is down around 11% if you've been a long-term shareholder now you would be down around 21% bear in mind if you were to reinvest dividends it would be slightly higher but we can see this company goes through a lot of UPS as well as a lot of downs the more recent all-time highs that we can see around $80 April 2022 quite some way away of what it is trading now around the $58 to $59 Mark in terms of the Topline Revenue now one thing to bear in mind is whilst we do want to see 3 to 7% in terms of Baseline growth utility sector is very cyclical we will see Peaks and troughs and as we can see on a graphical basis whilst essentially the top lines has been increasing over the longer term over year on year we can see increases followed by decreases ultimately though they have increased their Top Line 19.8 billion in March 2015 to around 25 billion in the latest annual report which is actually March 2024 so not even that long ago when we then take a look at their bottom line net income what we can see is around 3 billion reported in 20150 and in fact pretty much the same reported in 2024 just reinforcing that cyclicality with this industry and with National Grid and we can see as well graphically in terms of the movement year on-ear lots of changes increases followed by decreases across the board something that you just need to understand with cyclical companies like National Grid in the utility sector we then take a look at the health of this company their total cash versus total debt now what's nice to note their cash position has increased 77 million in 2015 705 million in their latest quarterly report so it has increased although again we can see inconsistencies even on their cash balance year on-ear as well as over the longer term and like we said that number doesn't really mean anything until we take a look in perspective numerically and directionally with their total debt 42 billion in 2015 61 billion in their latest quarterly report so whilst their cash has increased their total debt which was already starting off at a very high position has also increased and this already shows us that we will need to consider that dividend safety later on in the episode over the longer term though total debt has been increasing but again with utilities as a whole this is a common Trend that we do notice now we want to point out very quickly in terms of their earnings per share estimates over the next few years as well as the revenue they're anticipating 450 in 2025 the next 4 year 494 in 2026 and we can see that would give them a forward P of around 12 .11 and this just reinforces that c locality as we can see the next four year they're anticipating 27.2 billion to the Top Line March 26 around 26.89 so we can see year on-ear small increases followed by small decreases just something to bear in mind doesn't necessarily mean it isn't a company that you can invest in after all this is one that we do see a lot of upside in as we're about to find out terms of the valuation grade well they get an A Minor so off to a good start p as we mentioned 13.3 3 in terms of others in this utility sector 16.35 so as we can see you are getting a discount of nearly 20% in terms of other metrics as well you can see very favorable grades B pluses a and a minuses and if you were to look at it on a Price to Book trailing 12 months 1.15 again a discount of 32% on a price to sales forward looking as well you can see pretty much across the board it is trading significantly lower than that of the sector medium now when we take a look at essentially the growth grade now this is where things do start to get a little bit poor they have an f grade reason for this well the industry as a whole has been negative but for NG 8% the sector around -4% forward looking pretty much flat on their top line as we can see the sector whilst they are anticipating growth even very low 2.83% it is still better than what we can see for National Grid now there are the metrics here that if you do want to take a look you can incorporate into your own investment thesis the other thing we would point out earnings per share on a forward basis 2.44 year- on-year increase for the next 5 years as we can see the industry as a whole 6.37 we then move on essentially to the profitability and they do get an A+ now what we can see gross profit margin 100% we see the sector a lot lower at 44.6 to bottom line on a training 12mon basis 11.54 not that far dissimilar in fact from the sector of 12.38 and when we take a look at their cash from operations significantly higher 8.8 billion versus 1.3 hence why they get the A+ rating now a quick conclusion to this part of the analysis gives us a sell rating from Seeking Alpha a buy from Wall Street quite a high that is four out of five and a hold from Quant so very mixed across the board a minus on valuation an F on the growth and an A+ on profitability now the next thing that we want to draw your attention to is how they performed over the longer term what we can see in the utility sector we have quite a few popular names in fact we have reviewed Dominion Energy not too long ago as well as a few others so over the last year now this incorporates reinvesting those dividends total return you would be down -9% with National Grid when we expand this over the last 5 years you would be actually be up around 49% you'd be in the top three of their competitors and if you expanded it over the last 10 years well you can see you would be towards the bottom down or in fact up 22.54% but in comparison to others like PG up 179% it hasn't been the greatest investment over the longer term but as always the past performance of National Grid has nothing to do with their future performance they could perform significantly better in fact they could perform significantly worse as well now before we do jump into the dividend safety score just to let you know we've released our latest free weekly article running through 12 undervalued dividend stocks we talk about high quality companies if you want access to this completely free do click on that pin comment below you can also read other articles here for example how to find undervalued stocks all the websites and resources we use on the channel as well as other articles all completely free now we also want to draw your attention to institutional ownership we can see that around 5% 205 Million worth of sales by the institutions over the last 12 months during the same time period though we see nearly twice the amount of buys by these institutions and in fact we see significantly more buying in quarter 1 of 2024 the latest period as well as the previous period as well so lots of Institutions who are buying a lot more as this company as we saw has been decreasing over the last year but as always do your own due diligence don't just copy what these institutions do terms of dividend safety score well 45 it does look to be borderline safe this is a company with around 43 billion market cap a large cap company in fact and when we take a look it was reaffirmed at the end of last year that borderline save score effectively meaning that there is a moderate risk of a dividend cut over a full economic cycle now how did they perform during the last recession well they increased the dividend during the 0709 crash they had 11% pretty much around the average of the S&P but they did marginally outperform 49% recession return S&P 55 now for a company that has a forward yield of over 6% in fact their last four increase 6% very positive above the 4% minimum inflationary Target over the last five as well as the last 20 years you're at least getting an inflation stary increase with this company which is great to know especially for that nice yield but we do see 6 years of consecutive increases as well as 6 years of paying a dividend without a reduction now in terms of looking at dividend yield Theory as always for those that are new to the channel it states a company is undervalued when the current yield sits above the 5year average so we have our first sign of undervaluation do bear in mind though we're not looking at any of these models in isolation another undervaluation signal with the forward P 13.3 below the 5year rolling average and we can see significantly lower than these utility sector at 16.2 now on this channel we do draw your attention essentially to the free cash flow payout however for utilities a lot more volatile so we do bring your attention back to the earnings below 75% is the preference for utilities now over the longer term they in fact went through a period where it was significantly higher nice to note 2024 at 70% so a lot lower than the previous year also in 2025 it is anticipated to go up to 82% which isn't the worst and that does hopefully mean they can continue at a bare minimum to increase those dividends right in line with that 4% inflation rate we then move on to the earnings per share now we do want consistent increases over the longer term just understand that you are investing or looking to invest in a Utilities company so cality is the name of the game here hence why we see a very nice 84 cents from the previous year 64 but also into next year they are anticipating a drop down to 71 cents per share in terms of both earnings per growth as we can see on here and on the sales growth lots of volatility lots of cynicality year on year as we mentioned we do like to see steady moderate growth of 3 to 7% in fact just five of the last 10 years we see negative growth and if you do look at it over the longer term like we did earlier on you still do see growth over the longer period one thing that we always like is when companies do share BuyBacks returning excess cash so decreasing share count we actually see the opposite however this is something very typical that we do note with utilities as a whole just bear in mind that they do rely on this so that they can fund a portion of their expenditures Therefore your position as a shareholder would be dilution over the last 10e period if you have been a shareholder or investor during that time Ro I then return on invested Capital very important 10% or more for majority of companies 7 to 8% for utilities if you want to be industry specific just to give us Faith management are able to effectively allocate their capital and what we can see here on the graph is in fact it has been around that 7% over the longer term hopefully on a trading 12 month basis it does at a minimum stay at that 7% level we then take a look at the margins above 18% for utilities it has pretty much been above that although inconsistently over the longer term last year was very strong at 28% and as always what we want to identify are companies that increase both their top line as well as their margin although you could argue from 205 to 22% they have increased it to around 28% in 2024 now the net debt to ebit remember the earnings before interest tax depreciation ammortization correlating to balance sheet strength dividend safety below 5.5 for utilities and as we can see it has straddled around that for majority of the last 10 years and just a reminder these are the number of years it would take the company to pay off all of that debt net of cash on hand 5.81 in 2024 pretty much around the same over the next four year so it isn't that much higher than the maximum we want to see also the payout isn't that much higher so yes we do understand it is boardline safe but unless something drastically changes for now that dividend does look to be safe in terms of the valuation let's jump in as always though if you do enjoy the content value is being provided smash that like button hit that subscribe and Bell button so you are continually notified of these videos as they drop first model we jumping into is the multiples valuation model we have companies in a similar sector and size their P multiple the average multipli by that of NG to give us an intrinsic value here showing undervaluation just bear in mind that we're not looking at any one of these models in isolation we then move on to the dividend discount model now they do pay this in gbb Sterling so we have just gotten the latest yearly dividend and as we can see 4% was what they have increased it over the last 5 and 20 years so we've gone a bit more conservative at 3.5% and as we can see another undervaluation signal now typically the discounted cash flow model would be the third model we would use however as we said for utilities a lot more volatile so it isn't that accurate so we jump straight into the intrinsic value and in today's episode it is the average of these two models which aren't too dissimilar from each other around $865 now do bear in mind you can grab a copy of this model to get your own intrinsic value your own acceptable Buy price by clicking on the pined comment below whether you want to run the numbers through this company again or others in the market so margin of safety then we always start off with 10% and we execute on that if we believe it meets our three criteria a wide Mo strong financial metrics good forward-looking data if you believe that will it would be about up to $78 and then we keep going till it's near the current trading price and in today's episode we can see quite a sufficient margin of safety not quite there at 35% so it does add a minimum up to $60 $61 hold a 30% MOS level for a company that has historically had a nice forward yield around 6% or more as well as a nice increase over the long term at a minimum it is in line with inflation terms of Wall Street and their forecast well over the next 12 months they do anticipate $72 as their price Target they see upside of 24% as we saw they do indicate to be this a fairly good buy four out of five in terms of the analyst score as well as always though do let us know your thoughts in the comments below whether or not National Grid is one that's on your watch list maybe you are buying shares of this as it has been dropping over the more recent period or in fact maybe this isn't one that you are interested let us know the reasonings why and as always if you enjoy the content smash that like button hit that subscribe and Bell button we'll see you all on the next one