The 3 Most Undervalued Utilities Stocks to Buy in May 2024

  • Utilities offers stable, long-term investments that have resilience during economic downturns.
  • PG&E (PCG): Undervalued utility company with strong customer brand and constant innovation.
  • NextEra Energy (NEE): NextEra seems well-positioned to profit from a fast-growing market.
  • NRG Energy (NRG): Market allocation changes are expected to improve NRG’s revenue.
undervalued utilities stocks - The 3 Most Undervalued Utilities Stocks to Buy in May 2024

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Investing in undervalued utilities stocks is a good idea for several reasons. Utilities offer stable, long-term investments with regular dividend payouts, making them attractive for income-seeking investors. During economic downturns or periods of market volatility, utilities tend to perform well due to their lower volatility and predictable returns from dividends. Additionally, many utilities embrace renewable energy sources like solar and wind, positioning themselves for future growth in clean energy technologies. Despite regulatory challenges and infrastructure costs, utilities remain a solid option for investors looking for a steady income and potential growth in the evolving energy landscape. 

Due to current economic uncertainty, you need to own stable stocks that will deliver guaranteed returns (dividends) and provide services 100% crucial to our way of life, such as electricity and water utilities. Buy these top three undervalued utilities stocks, and you will not only make dividend income, but these companies are sure to grow in value — they are currently very underpriced you will score a discount!

PG&E (PCG) 

the PG&E logo on the front of a building
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PG&E (NYSE:PCG) is a public utility in Northern and Central California that sells and delivers electricity and natural gas to customers. Valued at $17.57, PG&E grew 1.62% in the past year. 

The U.S. utilities market expects to have a CAGR of 9.51% to reach $6.37 billion by 2027. PG&E, one of California’s most recognizable utility companies, commands a market cap of $45.944 billion. 

PG&E reported double-digit returns, ending the fiscal year 2023. Revenue grew 12.68% to $24.428 billion from $21.68 billion the previous year. Net income and Diluted EPS had YOY growths of 24.56% and 25%, respectively. 

PG&E serves two-thirds of the utility customers in Northern California, around 5 million customers, establishing a solid business footprint for a century. PG&E has continuously invested in hydroelectric storage and generation, natural gas pipelines and nuclear energy to improve its operations and innovate. Additionally, PG&E invested heavily in newer technologies, such as smart meters, which enhance electric consumption monitoring. PG&E is the most undervalued utility company in the U.S. due to its impressive customer brand and strong innovation.

NextEra Energy (NEE)

Nextra Energy (NEE) website on a mobile phone screen
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NextEra Energy (NYSE:NEE) is a clean energy company that operates one of the largest electricity suppliers in the United States, Florida Power & Light Company. The company owns various other clean energy subsidiaries.

NEE stock is up 16.50% YTD, an indicator of healthy growth. Analysts are targeting a price of $73.54 from a current price of $71.70, but on the higher side, some are targeting a cost of $102.80. Analysts gave a bullish sentiment in May, with 13 out of 15 analysts rating the stock a ‘buy’ or above.

NextEra competes in the clean energy industry, which has a projected CAGR of 9.1% and is expected to reach a value of $1.4 trillion by 2032. Rising demand for renewable energy sources drives the industry’s growth, with favorable government initiatives and high investments providing the capital needed to implement clean energy solutions. Additionally, the rapid advancement of technology will only further benefit the sector.

NextEra’s revenue declined by 25.38% last year. However, the company has taken steps to ensure its profits will grow over the next few years. Its cash and short-term investments grew to $2,705 million in 2023, a 65.54% increase over the previous year. Additionally, net income grew by 95.53%. These are optimistic indicators of the company’s future growth.

NextEra’s position in the Florida Power & Light Company means it can capitalize on the government’s favorable stances on renewable energy. This proves to be a strong catalyst for the company moving forward, as shareholders can expect the stock to perform similarly or even slightly better than the market CAGR over the next few years.

Overall, NextEra is an excellent stock for those interested in renewable energy.

NRG Energy (NRG)

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NRG Energy (NYSE:NRG) is an American energy company located in Texas. It focuses on generating and selling energy to consumers. Currently valued at $73.40, NRG has seen recent success through its jump in valuation by 134.43% YOY. 

Though NRG Energy had a down quarter revenue-wise, it showed yearly solid growth through net income and profit margins. Starting with revenue, NRG brought in $6.81 billion, beating industry estimates. However, the financial upturn was found in net income and net profit margin with figures of $482 million and 7.08%, marking a year-over-year figure improvement of 144.02% and 150.79%, respectively.

The most significant catalyst behind NRG’s projected growth is the upcoming change in leadership. Elizabeth Killinger, the Executive Vice President of NRG Energy, announced her retirement from the position. At the same time, Rasesh Patel was named the president of both Smart Home and Home Energy divisions, marking a shift in focus in NRG energy allocation. Allocating more resources into these growing industries will boost NRG revenue, ensuring a promising 2024.

On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.


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