Weighted
$105.17
Conviction
6.4/10
Decision
Starter long
Method
Residual income
Revised current conclusion
Bear $72.65, Base $107.95, Bull $132.14. Weighted $105.17. Expected return -13.0%. Historical original values are preserved only in labeled comparisons.
| Case | Probability | Current value | Return |
|---|---|---|---|
| Bear | 25% | $72.65 | -39.9% |
| Base | 50% | $107.95 | -10.7% |
| Bull | 25% | $132.14 | 9.3% |
Company-specific method
Five-year clean-surplus residual income. Opening common book value, EPS, payout, dilution, earned-return spread and cost of equity are explicit. Dividend discount, rate-base earnings power, SOTP, justified P/E and EV/rate-base remain cross-checks.
Formula: BVPS plus present value of residual income, where residual income equals EPS minus cost of equity times opening BVPS.
Current to Bear, Base and Bull bridges
| Variable | Current | Bear | Base | Bull |
|---|---|---|---|---|
| rate base | Exact consolidated rate base is not a GAAP line and is not published as one frozen total; capital plan $77.937bn for 2026-2030 | [1.0, 1.04, 1.08, 1.12, 1.16] | [1.0, 1.07, 1.14, 1.22, 1.3] | [1.0, 1.08, 1.17, 1.27, 1.38] |
| load | 69 GW headline spans mixed commitment states; AEP Texas 45 GW letters including 40 GW prospective Batch Zero | [1, 1.01, 1.02, 1.03, 1.04] | [1, 1.02, 1.04, 1.07, 1.1] | [1, 1.03, 1.07, 1.12, 1.18] |
| customer rates | Filed jurisdiction-specific tariffs; no single consolidated $/MWh rate | [1, 1.045, 1.09, 1.135, 1.18] | [1, 1.055, 1.11, 1.17, 1.23] | [1, 1.06, 1.12, 1.19, 1.26] |
| authorized roe | Predominant jurisdiction range 9.25%-10.50% in FY2025 filing | [0.0925, 0.0925, 0.0925, 0.0925, 0.0925] | [0.097, 0.097, 0.097, 0.097, 0.097] | [0.1, 0.1, 0.1, 0.1, 0.1] |
| earned roe | FY2025 common earnings $3.580bn / average common equity approximates 12.3%, elevated by period mix; normalized starting range 10.5%-11.0% | [0.092, 0.091, 0.091, 0.092, 0.092] | [0.102, 0.102, 0.103, 0.103, 0.103] | [0.108, 0.109, 0.11, 0.11, 0.11] |
| regulatory lag | Mixed formula rates, riders and litigated state cases; exact consolidated months unavailable | [12, 13, 14, 14, 15] | [9, 9, 8, 8, 8] | [7, 6, 6, 5, 5] |
| operating expenses | FY2025 GAAP total operating expenses $16.491bn | [1, 1.05, 1.1, 1.15, 1.2] | [1, 1.04, 1.08, 1.12, 1.16] | [1, 1.035, 1.07, 1.105, 1.14] |
| eps operating earnings | $6.40 midpoint of 2026 operating EPS guidance | [6.592, 6.79, 6.994, 7.204, 7.42] | [6.848, 7.327, 7.84, 8.389, 8.976] | [6.944, 7.534, 8.174, 8.869, 9.623] |
| capex | FY2025 $8.583bn; 2026-2030 plan $77.937bn | [12.8, 13.5, 13.8, 14.0, 14.2] | [12.8, 15.5, 16.0, 16.5, 17.1] | [12.8, 16.0, 17.0, 18.0, 19.0] |
| depreciation | FY2025 depreciation and amortization included in GAAP expenses; 1H26 $1.817bn | [1, 1.06, 1.12, 1.18, 1.24] | [1, 1.07, 1.15, 1.23, 1.32] | [1, 1.08, 1.17, 1.27, 1.38] |
| working capital | No isolated valuation shortcut; fuel under/over-recovery and construction timing dominate | [0.4, 0.5, 0.6, 0.7, 0.8] | [0.3, 0.3, 0.4, 0.4, 0.5] | [0.3, 0.4, 0.5, 0.6, 0.7] |
| taxes | FY2025 GAAP tax expense embedded in statements; 1H26 $96m | [0.15, 0.16, 0.17, 0.18, 0.19] | [0.17, 0.18, 0.19, 0.2, 0.21] | [0.18, 0.19, 0.2, 0.21, 0.22] |
| debt | 2025 current plus noncurrent long-term debt $47.322bn | [50, 54, 58, 62, 66] | [50, 55, 60, 65, 70] | [49, 54, 59, 64, 69] |
| equity issuance dilution | 1H26 diluted average 548.847m; disclosed $3bn marketed equity transaction | [550, 554, 558, 562, 566] | [550, 552, 554, 556, 558] | [548, 548, 549, 550, 551] |
| dividend growth payout | Implied annual dividend $3.7975, about 59.3% of $6.40 EPS midpoint | [0.64, 0.64, 0.64, 0.64, 0.64] | [0.6, 0.6, 0.6, 0.6, 0.6] | [0.56, 0.56, 0.56, 0.56, 0.56] |
| cost of equity | Frozen reverse model used 9%; reassessed from regulated utility duration and rate sensitivity | [0.09, 0.09, 0.09, 0.09, 0.09] | [0.08, 0.08, 0.08, 0.08, 0.08] | [0.075, 0.075, 0.075, 0.075, 0.075] |
| terminal economics and payout | Clean-surplus book $57.33/share; terminal residual income depends on earned ROE versus cost of equity | {'ri_growth': 0, 'payout': 0.64} | {'ri_growth': 0.02, 'payout': 0.6} | {'ri_growth': 0.025, 'payout': 0.56} |
Scorecard
| Pillar | Original | Revised |
|---|---|---|
| business quality | 7.4 | 7.4 |
| management quality | 8.0 | 8.0 |
| industry tailwind | 9.0 | 9.0 |
| valuation | 7.0 | 4.0 |
| risk asymmetry | 6.5 | 4.0 |
Conviction 7.520 to 6.370. Valuation and Risk change only because documented rubric bands changed.