As of May 23, 2025, Southern Co's estimated intrinsic value ranges from $68.81 to $220.07 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $140.76 | +58.4% |
| Discounted Cash Flow (5Y) | $105.89 | +19.2% |
| Dividend Discount Model (Multi-Stage) | $86.17 | -3.0% |
| Dividend Discount Model (Stable) | $68.81 | -22.5% |
| Earnings Power Value | $220.07 | +147.7% |
Is Southern Co (SO) undervalued or overvalued?
With the current market price at $88.84, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Southern Co's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.36 | 0.41 |
| Cost of equity | 5.5% | 7.1% |
| Cost of debt | 4.0% | 4.9% |
| Tax rate | 11.3% | 14.3% |
| Debt/Equity ratio | 0.66 | 0.66 |
| After-tax WACC | 4.7% | 6.0% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $106 | $182,792M | 82.2% |
| 10-Year Growth | $141 | $221,154M | 69.3% |
| 5-Year EBITDA | $51 | $121,986M | 73.3% |
| 10-Year EBITDA | $84 | $158,973M | 57.3% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $16,305M |
| Discount Rate (WACC) | 6.0% - 4.7% |
| Enterprise Value | $272,737M - $344,084M |
| Net Debt | $66,294M |
| Equity Value | $206,443M - $277,790M |
| Outstanding Shares | 1,100M |
| Fair Value | $188 - $252 |
| Selected Fair Value | $220.07 |
| Metric | Value |
|---|---|
| Market Capitalization | $97741M |
| Enterprise Value | $164035M |
| Trailing P/E | 21.22 |
| Forward P/E | 19.22 |
| Trailing EV/EBITDA | 5.55 |
| Current Dividend Yield | 302.98% |
| Dividend Growth Rate (5Y) | 2.42% |
| Debt-to-Equity Ratio | 0.66 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $42.23 |
| Discounted Cash Flow (5Y) | 25% | $26.47 |
| Dividend Discount Model (Multi-Stage) | 20% | $17.23 |
| Dividend Discount Model (Stable) | 15% | $10.32 |
| Earnings Power Value | 10% | $22.01 |
| Weighted Average | 100% | $118.26 |
Based on our comprehensive valuation analysis, Southern Co's weighted average intrinsic value is $118.26, which is approximately 33.1% above the current market price of $88.84.
Key investment considerations:
Given these factors, we believe Southern Co is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.