Value
6.7/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 6.7 |
| P/S | 7.1 |
| Fwd P/E | 8.8 |
| PEG | 6.9 |
| Analyst target | 4.0 |
- ▸Forward P/E: 12.6x
- ▸PEG: 1.02
NGG · Why this verdict
Why National Grid Transco, PLC Nati (NGG) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.3/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
National Grid's free cash flow is -96% relative to net income, indicating that nearly all reported earnings are consumed by capital investment, which raises serious questions about the sustainability of the dividend without external financing. Quality breakdown | Free cash flow generation improves above -50% of net income within 12 months as major capital projects reach completion. | →Stable |
| CounterLarge regulated utilities routinely operate with negative near-term free cash flow due to multi-year infrastructure investment cycles, and regulators allow cost recovery through future rate increases. | ||
National Grid generates 18% net margins and ranks at the top of its regulated utilities peer group for margin quality, with a Piotroski F-Score of 7 confirming multi-dimensional financial health. Quality breakdown | Net margins remain above 15% over the next 12 months as regulated rate adjustments offset inflationary cost pressures. | →Stable |
| CounterThe Rule of 40 score is -16, meaning the combination of slow growth and capital spending requirements is destroying economic value despite strong reported margins. | ||
The current price already exceeds the analyst consensus target by approximately 5%, meaning there is no near-term price appreciation potential priced into analyst models for investors entering today. Warnings | Analyst consensus price target increases above $86 within 12 months driven by regulated rate case approvals or dividend growth guidance. | →Stable |
| CounterRegulated utilities can trade above analyst targets for extended periods when their dividend yield is attractive relative to interest rates, particularly during risk-off market conditions. | ||
A debt-to-equity ratio of 1.2 and leverage penalty in the analysis signal that the balance sheet carries meaningful financial risk relative to the utility's ability to generate free cash flow for debt service. Bear case | Debt-to-equity ratio declines below 1.0 within 18 months as cash flow from completed infrastructure projects improves the capital structure. | →Stable |
| CounterRegulated utilities routinely carry D/E ratios above 1.0 as their stable, regulated cash flows provide adequate debt service coverage, and creditors typically view this leverage as acceptable. | ||
National Grid's free cash flow is -96% relative to net income, indicating that nearly all reported earnings are consumed by capital investment, which raises serious questions about the sustainability of the dividend without external financing.
→StableQuality breakdown
- Expectation
- Free cash flow generation improves above -50% of net income within 12 months as major capital projects reach completion.
CounterLarge regulated utilities routinely operate with negative near-term free cash flow due to multi-year infrastructure investment cycles, and regulators allow cost recovery through future rate increases.
National Grid generates 18% net margins and ranks at the top of its regulated utilities peer group for margin quality, with a Piotroski F-Score of 7 confirming multi-dimensional financial health.
→StableQuality breakdown
- Expectation
- Net margins remain above 15% over the next 12 months as regulated rate adjustments offset inflationary cost pressures.
CounterThe Rule of 40 score is -16, meaning the combination of slow growth and capital spending requirements is destroying economic value despite strong reported margins.
The current price already exceeds the analyst consensus target by approximately 5%, meaning there is no near-term price appreciation potential priced into analyst models for investors entering today.
→StableWarnings
- Expectation
- Analyst consensus price target increases above $86 within 12 months driven by regulated rate case approvals or dividend growth guidance.
CounterRegulated utilities can trade above analyst targets for extended periods when their dividend yield is attractive relative to interest rates, particularly during risk-off market conditions.
A debt-to-equity ratio of 1.2 and leverage penalty in the analysis signal that the balance sheet carries meaningful financial risk relative to the utility's ability to generate free cash flow for debt service.
→StableBear case
- Expectation
- Debt-to-equity ratio declines below 1.0 within 18 months as cash flow from completed infrastructure projects improves the capital structure.
CounterRegulated utilities routinely carry D/E ratios above 1.0 as their stable, regulated cash flows provide adequate debt service coverage, and creditors typically view this leverage as acceptable.
TrendMatrix Research · core thesis
Engine thesis — one sentence
National Grid is a regulated electric utility with best-in-class 18% margins and a Piotroski F-Score of 7, but its free cash flow is deeply negative relative to net income at -96%, analyst targets have already been reached, and the risk/reward setup is structurally unfavorable at current prices.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.8 |
| ROA | 2.0 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 9.2 |
| Current ratio | 3.1 |
| FCF quality | 0.0 |
| Moat | 5.2 |
| Rule of 40 | 3.0 |
| Piotroski F | 7.8 |
- ▸Strong margins: 18%
- ▸Earnings quality RED FLAG: -96% FCF/NI
- ▸No competitive moat
- ▸Rule of 40: -16 (fail)
Growth
4.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.0 |
| EPS growth | 4.9 |
Momentum
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 9.7 |
| OBV | 1.0 |
| MA position | 7.0 |
| Volume | 2.7 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.5 |
| Analyst rating | 6.5 |
| Price target | 6.4 |
- ▸Light analyst coverage (5.0) — signal dampened
Insider
5.0/10data confidence 50%Peer rank
3.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.5 |
| quality rank | 5.2 |
| growth rank | 2.1 |
- ▸Best-in-class margins
Technical
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.5 |
| support resistance | 2.3 |
| 52w position | 8.0 |
| gap | 5.0 |
Risk (lower is worse)
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.9 |
| days to cover | 10.0 |
| volatility | 7.7 |
| put call | 7.4 |
| implied vol | 5.1 |
| beta | 9.4 |
| debt equity | 4.6 |
Catalyst
4.7/10data confidence 75%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| dividend safety | 4.2 |
| news activity | 5.0 |
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.2>=4.5
- INSIDER:OK
- 8K:CLEAN
- EARNINGS_PROXIMITY:NO_DATE
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.9=NEGATIVE
Warning (1)
- MOMENTUM:5.2<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
-0.90
Upside
-4.5%
Downside
5.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.8 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Risk (lower is worse) at 7.7) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.9=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.90 — supplementary context, not the trigger for this path.
The strongest dimensions are Risk (lower is worse) at 7.7, Value at 6.7, and Sentiment at 6.5; the weakest are Peer rank at 3.9, Growth at 4.0, and Technical at 4.5. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -0.90 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Regulated Utility Margin Quality
Trip ifNet margin falls below 12% for 2 consecutive reporting periods.
- P2Negative Fcf Dividend Risk
Trip ifFree cash flow remains below -80% of net income for more than 3 consecutive quarters.
- P3Price Exceeds Analyst Target
Trip ifPrice rises above $88 without analyst consensus target increasing above $88.
- P4Leverage Debt Risk
Trip ifDebt-to-equity ratio rises above 1.5 or interest coverage falls below 2x based on reported financials.