Northwest Natural Holding (NWN) On Texas Growth Hopes, Is The Valuation Case Too Easy?
How Northwest Natural Holding Stock Has Been Trading Recently
Northwest Natural Holding (NWN) stock has been relatively steady recently, with a last close of $48.92 and mixed short term moves that include a 2.2% daily decline and a 5.3% drop over the past week.
Over the past month the share price is marginally higher, while the past 3 months show a 7.5% decline. Year to date, the stock is up 4.7%, and the reported 1 year total return is 27.7%.
See our latest analysis for Northwest Natural Holding.
Recent trading suggests momentum in Northwest Natural Holding is softening in the short term. However, the 1 year total shareholder return of 27.7% points to a stronger longer term outcome than recent share price moves alone might imply.
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Bulls point to Northwest Natural Holding's 1 year total return of 27.7% and recent revenue and net income growth. Bears focus on the softer near term share move and intrinsic value gap. Which case does the current valuation support next?
Most Popular Narrative: 14.9% Undervalued
Compared with the latest fair value narrative of $57.50 per share, Northwest Natural Holding at $48.92 sits at a clear discount that hinges on growth outside its core Oregon and Washington gas utility footprint.
Robust customer growth in Texas via the SiEnergy and Pines acquisitions, supported by urbanization and population expansion, suggests a long tailwind for meter additions, translating to steady increases in revenues and future earnings.
Execution of sizeable backlogs for future meters at SiEnergy (over 217,000 signed contracts) in fast growing Texas markets indicates multi year visibility for organic revenue growth and strengthened earnings power.
The popular narrative on Northwest Natural Holding leans heavily on how these meter additions, forecast revenue growth and slightly higher margins feed into a richer future earnings base and a higher implied P/E multiple. It raises the question of which specific growth and profitability assumptions have to hold up to support a fair value above $57 per share.
Result: Fair Value of $57.50 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, you still need to weigh the risk that tighter decarbonization policy or weaker Texas housing activity could limit the meter growth that Northwest Natural Holding is priced for.
Find out about the key risks to this Northwest Natural Holding narrative.
Another View On Northwest Natural Holding Valuation
While the fair value narrative suggests Northwest Natural Holding is 14.9% undervalued at $48.92, the SWS DCF model tells a different story. On this view, the stock trades above an estimated future cash flow value of $40.46, which points to an overvalued outcome instead. Which lens seems more convincing in your assessment?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Northwest Natural Holding for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With both risks and rewards in play for Northwest Natural Holding, it makes sense to move quickly and weigh the full picture for yourself. A balanced next step is to review the 3 key rewards and 2 important warning signs
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This 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.
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