Dominion Energy (D) Merger Filing Puts Its Undervalued Narrative Back In Focus

Dominion Energy (D) is back in focus after filing a detailed response with the Federal Energy Regulatory Commission regarding a requested 60 day extension of the comment period on its proposed merger.

The merger related filing comes as Dominion Energy’s share price return over the year to date is 11.43%, while the 1 year total shareholder return is 15.06%. This points to positive longer term momentum even though the 30 day share price return declined 4.57% and the 7 day move also eased ahead of this latest regulatory update.

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Bulls point to Dominion Energy’s solid 1 year total return and sizeable intrinsic discount, while bears highlight the recent share price pullback and regulatory overhang. Which story does the current valuation really line up with next?

Most Popular Narrative: 7% Undervalued

The most followed narrative values Dominion Energy at $71 per share, compared with the last close at $66.01. That gap is based heavily on long term grid and renewables spending linked to rising power demand.

Large scale investments in regulated renewables, especially the Coastal Virginia Offshore Wind (CVOW) project, position Dominion to benefit from the accelerating energy transition, earning stable regulated returns and expanding rate base, with a positive impact on long term earnings.

Read the complete narrative. Read the complete narrative.

Want to see what is behind that valuation gap for Dominion Energy? The narrative focuses on steady revenue growth, firmer margins and a future profit multiple above the industry. The key question is how those assumptions compare with the merger terms and the regulatory file now on the table.

Result: Fair Value of $71 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Dominion Energy’s merger story still hinges on regulatory approvals and large CVOW project costs, either of which could challenge today’s most optimistic narrative.

Find out about the key risks to this Dominion Energy narrative.

Next Steps

Given the mix of optimism and concern around Dominion Energy, this is a moment to move quickly and test the assumptions yourself. Start by weighing 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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