Consolidated Edison, Inc. (ED)

FairStock Score: 53/100 — MIXED

Key Financials

Strengths

• Essential monopoly utility serving 3.7M customers in densely populated NYC/Westchester region with regulatory pricing power
• Stable, predictable revenue model with 7.44% net margin demonstrating operational consistency
• Low beta of 0.34 provides portfolio defensive characteristics and stable returns in downturns
• Critical infrastructure position with high barriers to entry and long-term contractual revenue stability

Concerns

• Severely overvalued at 19.41 P/E with Graham Number suggesting 218% margin of safety to the downside
• Negative free cash flow of $145.3M contradicts expectations for mature utility generating cash
• Poor Piotroski F-Score of 3/9 and Altman Z-Score of 0.84 signal deteriorating financial quality
• Weak returns with ROE of 8.77% and ROCE of 3.19% barely justify cost of capital; leverage at 1.17 D/E ratio

AI Analysis

Consolidated Edison represents a classic regulated utility—a business model I've long admired for its predictable cash flows and essential services. The company serves 3.7 million electric customers across New York City and Westchester, a geographic moat that's difficult to replicate. The 7.44% net margin in Q4 2025 and consistent revenue generation reflect operational stability in an essential service business. However, I'm troubled by several red flags here. The Graham Number of $35.16 versus a market price of $111.80 reveals a staggering 217% negative margin of safety—this stock is dramatically overvalued by fundamental metrics. The Piotroski F-Score of 3/9 signals deteriorating financial health, while negative free cash flow of $145.3M is concerning for a utility that should be generating cash. The Altman Z-Score of 0.84 suggests financial distress, and the debt-to-equity ratio of 1.17 is elevated for a regulated utility. The EV/EBITDA multiple of 52.29 is punitive—I'd expect single-digit multiples for a mature utility. The ROE of 8.77% and ROCE of 3.19% are underwhelming, barely exceeding the cost of capital. While the low beta of 0.34 provides defensive characteristics and the company operates in a stable regulatory environment with pricing power, the valuation doesn't compensate for these modest returns. At current levels, ED fails my fundamental criteria for investment. The regulatory moat is real, but it's already priced for perfection. I'd wait for a significant pullback—perhaps toward the Graham Number—before reconsidering this otherwise stable utility.

Bull Case

Regulated utilities offer inflation-hedged cash flows with regulatory support for rate increases, and ED's essential infrastructure in premium NYC markets ensures durable demand. The low beta and defensive characteristics provide portfolio stability while management navigates the energy transition toward cleaner grids.

Bear Case

Negative free cash flow, deteriorating financial metrics (F-Score 3/9, Z-Score 0.84), and extreme valuation multiples suggest the market has priced in unrealistic growth assumptions. Rising interest rates disproportionately hurt leveraged utilities, and ED's 1.17 D/E ratio limits financial flexibility amid inflationary pressures.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer