Eversource Energy (ES)

FairStock Score: 67/100 — STEADY

Key Financials

Strengths

• Genuine regulatory moat with essential infrastructure monopolies across New England markets
• Consistent free cash flow generation of $761.5M demonstrates operational reliability
• Solid quarterly margins at 12.5% net income margin showing efficient operations
• Low beta of 0.75 provides defensive portfolio characteristics in downturns
• Diversified revenue streams across electric, gas, and water distribution segments

Concerns

• Catastrophically overvalued with 2.2x Graham Number; negative margin of safety of -124%
• Alarming Altman Z-Score of 0.49 signals financial distress; excessive D/E ratio of 1.85
• Abysmal ROCE of 3.17% means capital is not being deployed productively
• Elevated EV/EBITDA of 41.61 is indefensible for a regulated utility with minimal growth

AI Analysis

Eversource Energy presents the classic utility paradox: a business with genuine competitive moats operating in a heavily regulated environment, yet trading at valuations that concern me deeply. Let me be direct—this is a mediocre business at an unreasonable price. The company operates essential infrastructure with natural monopolies in electricity, gas, and water distribution across New England. That's genuine competitive advantage. The 12.5% net margin in Q4 and $761.5M free cash flow demonstrate operational competence. However, the financial metrics are troubling. A Graham Number of $32.97 versus a market price of $73.85 represents a negative margin of safety of -123.99%—I'm paying 2.2 times what the asset value justifies. The EV/EBITDA of 41.61 is unconscionable for a regulated utility. More concerning is the Altman Z-Score of 0.49, suggesting financial distress, combined with a debt-to-equity ratio of 1.85—excessive leverage for a low-growth business. The ROCE of 3.17% is anemic; I'm not earning adequate returns on capital employed. The Piotroski F-Score of 6/9 indicates moderate financial quality, nothing exceptional. This business trades like a growth stock while performing like a slow grower. With a beta of 0.75, it offers defensive characteristics, but I demand a margin of safety for that privilege. Utilities are worth owning at the right price, but this isn't it. The FairStock Score of 52/100 is the most honest assessment here.

Bull Case

Eversource benefits from essential utility infrastructure with regulated returns and rising energy demand in New England. Rate increases approved by regulators and infrastructure investment requirements provide long-term earnings visibility and stable dividend support.

Bear Case

The company is overleveraged with dangerous financial metrics (Z-Score 0.49) while trading at extreme valuations offering no margin of safety. Rising interest rates compound debt burdens, and regulated returns may not justify the inflated capital structure.

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