A Look At Algonquin Power & Utilities (TSX:AQN) Valuation After Appointing New Chief Operating Officer

Algonquin Power & Utilities (TSX:AQN) has appointed industry veteran Peter Norgeot as Chief Operating Officer. He has been tasked with leading its regulated electric, gas, and water utilities and tightening operational execution across the business.

See our latest analysis for Algonquin Power & Utilities.

The new COO appointment comes as Algonquin’s share price sits at CA$8.64, with a 30 day share price return of 8.0% and a 1 year total shareholder return of 43.0%. This suggests momentum has been rebuilding after a tough five year total shareholder return decline of 46.2%.

If this management change has your attention, it could be a good moment to widen your watchlist with fast growing stocks with high insider ownership.

With the shares trading at CA$8.64 and an implied 54% discount to one intrinsic value estimate, the question is whether Algonquin is still on sale or whether the market is already pricing in a stronger future.

Most Popular Narrative: 4% Overvalued

With Algonquin Power & Utilities last closing at CA$8.64 against a most-followed fair value of CA$8.33, the narrative points to a small premium and a finely balanced setup.

The analysts have a consensus price target of CA$7.369 for Algonquin Power & Utilities based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$9.06, and the most bearish reporting a price target of just CA$6.01.

Read the complete narrative.

Want to see what has to happen for this utility to earn its way into that fair value range? Revenue growth, margin rebuild and a very specific future earnings multiple sit at the core of this narrative. The full breakdown shows how those pieces are expected to work together over the next few years.

Result: Fair Value of $8.33 (OVERVALUED)

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

However, the picture could shift quickly if the pure-play utility transition runs into integration issues, or if regulatory setbacks around rate cases and billing investigations drag on.

Find out about the key risks to this Algonquin Power & Utilities narrative.

Another Take: What Our DCF Model Says

Analysts see Algonquin as only slightly ahead of their CA$8.33 fair value, but our DCF model points in a very different direction. Based on those cash flow assumptions, AQN at CA$8.64 appears materially undervalued. This raises a simple question: which set of assumptions do you consider more reliable?

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 Algonquin Power & Utilities 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 879 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Algonquin Power & Utilities Narrative

If you look at these assumptions and feel they miss something, you can test your own inputs and spin up a custom view in minutes: Do it your way.

A great starting point for your Algonquin Power & Utilities research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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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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