Edison International is scored 65 for moat and 35 for management. The management score rests on a return on invested capital of 6.3% and a gross margin of 57.8% — figures that describe capital earning less than it costs to employ. The balance sheet carries debt at 2.42x equity, which magnifies both the returns above and the risk beneath them. The solid moat and weak management are not the same judgement, and the gap between them is where the argument about this business sits.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 7.3% a year, the rate measured from the filings. The exit multiple assumed is 14.6x. That produces an intrinsic value of $70.83, a 10-CAP price of $42.51 and a payback time price of $47.31, with the value zone set at the highest of the three, $47.31. Today's price of $53.80 sits 14% above it.
The price is above the value zone and the business scores 65 for moat and 35 for management. Neither test argues for paying up here.
| Price | $53.80 |
| Market cap | $20.7B |
| P/E ratio | 5.6x |
| Return on invested capital | 6.3% |
| Gross margin | 57.8% |
| Debt to equity | 2.42x |
| Free cash flow yield | -3.1% |
| Growth rate used | 7.3% |
| Growth rate measured | 7.0% |
| Exit multiple assumed | 14.6x |
| Company | Moat | Buy price |
| Eversource Energy (ES) | 51 | $48.48 |
| PPL Corporation (PPL) | 39 | $17.71 |
| Alliant Energy (LNT) | 43 | $6.38 |
| FirstEnergy (FE) | 52 | $38.57 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Edison International rather than accepting ours.