Entergy Corporation (ETR)

FairStock Score: 44/100 — MIXED

Key Financials

Strengths

• Regulated utility model provides pricing stability and predictable revenues in four-state footprint
• Low beta of 0.60 offers defensive characteristics during market downturns
• Established infrastructure and customer base of 2.9+ million in essential service sector
• Recent Q4 2025 showed positive net income of $240.5M with 8.13% margin
• Monopoly-like distribution positions in served territories limit competition

Concerns

• Severe overvaluation: trading at 5x Graham Number with -400% margin of safety
• Negative free cash flow of -$3.6B indicates fundamental operational or capital intensity problems
• ROCE of 2.99% and ROE of 10.77% fail to generate adequate returns on invested capital
• Altman Z-Score of 0.80 signals financial distress; elevated debt-to-equity ratio of 1.82
• EV/EBITDA of 59.22 is indefensible for a mature utility; Piotroski score deteriorating at 5/9

AI Analysis

Looking at Entergy Corporation through a value lens, I see a regulated utility with a predictable business model but troubling financial metrics that demand caution. The company operates in a defensible niche—regulated electric distribution across four states—which typically provides steady cash flows and pricing power. However, the numbers tell a concerning story. With a P/E of 25.55 against a Graham Number of just $20.94, we have a negative margin of safety of -400%. This is a colossal red flag. The company is trading at a 399% premium to intrinsic value by Graham's conservative standard. More alarming still: negative free cash flow of -$3.6B and an FCF yield of -2.1%. A utility burning cash rather than generating it is fundamentally broken. The Altman Z-Score of 0.80 suggests financial distress territory. An EV/EBITDA of 59.22 is absurdly elevated for a utility that should trade at 12-15x. The ROE of 10.77% is mediocre, while ROCE of 2.99% is frankly abysmal—well below the cost of capital. The Piotroski F-Score of 5/9 indicates deteriorating financial quality. While the low beta of 0.60 and regulated nature offer some downside protection, I cannot justify this valuation. The debt-to-equity ratio of 1.82 is elevated for the sector. At current prices, I see value destruction ahead, not opportunity.

Bull Case

If Entergy successfully rationalizes its capital spending and stabilizes free cash flow generation, the regulated utility model could provide steady 4-5% dividend income with predictable earnings growth. Recent infrastructure investments in renewable energy integration and grid modernization could unlock regulatory approval for rate increases, supporting long-term returns.

Bear Case

Persistent negative free cash flow suggests structural problems in capital allocation or regulatory headwinds that won't resolve quickly. At such an extreme valuation premium, any disappointment in earnings or regulatory outcomes could trigger a sharp repricing downward, eroding shareholder value significantly.

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