On Monday, National Grid (LSE:LON:NG) (NYSE:NGG) received an upgrade in its stock rating to Buy from Neutral by a Citi analyst. Accompanying the rating upgrade, the price target for the company's shares was also raised to GBP 9.85, up from the previous target of GBP 9.20.
The analyst cited several reasons for the optimistic outlook on National Grid. Key among them is the positive political and regulatory environment that the company is expected to benefit from. Additionally, the firm has made significant improvements to its balance sheet, effectively removing previous financial overhangs.
National Grid's current valuation was highlighted as attractive, particularly in light of the company's assets which are successfully meeting regulatory and financial targets. There is room for improvement, but the company's performance is solid.
The shares of National Grid are currently trading at a 10% discount to its long-term enterprise value to the regulated asset base (EV RAB) premium of 30%.
Investors are also drawn to National Grid's dividend, which is both sustainable and projected to grow, currently offering a yield of approximately 5.5%.
The combination of these factors, along with the potential macroeconomic benefit from anticipated rate cuts by the Bank of England later in the year and into 2025, suggests a favorable risk-reward scenario for the company's stock.
InvestingPro Insights
Following the recent upgrade in stock rating for National Grid (NYSE:NGG) by a Citi analyst, the InvestingPro platform provides additional insights that could be of interest to investors. National Grid has demonstrated a commitment to shareholder returns, having raised its dividend for 5 consecutive years and maintaining dividend payments for 29 consecutive years. This dedication to dividends is underscored by a significant yield, which currently stands at 4.08% as of the last twelve months ending Q4 2024.
The company's stock appears to be undervalued according to InvestingPro's real-time data, trading near its 52-week low and with a P/E ratio of 14.21, which is further reduced to 11.22 when adjusted for the last twelve months as of Q4 2024. Additionally, National Grid's price/book ratio during the same period is 1.1, suggesting that the stock might be trading at a price relatively close to its book value.
Investors looking for additional insights can find more InvestingPro Tips on National Grid's performance and forecasts. Currently, there are 6 additional tips available, which could provide a deeper understanding of the company's financial health and market position. For those interested in expanding their investment research on National Grid, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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