- Wondering if MDU Resources Group at around US$19.65 is offering value right now, or if the recent run puts it on the expensive side.
- The stock has pulled back about 4.7% over the past week and 2.9% over the past month, although the 1 year return sits at 18.7% and the 3 and 5 year returns are 91.5% and 89.5% respectively.
- Recent coverage has focused on MDU Resources Group as a regulated utility and infrastructure business. Investors are paying attention to how its mix of operations and capital spending plans fit into a long term story. That context helps frame the recent pullback alongside the stronger multi year return profile.
- Despite that performance history, MDU Resources Group currently has a value score of 0 out of 6. The sections ahead will walk through different valuation methods in detail and finish by looking at a broader way to think about what the market might be pricing in.
MDU Resources Group scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: MDU Resources Group Dividend Discount Model (DDM) Analysis
The Dividend Discount Model estimates what a stock might be worth by projecting future dividends, then discounting them back to today. It is especially useful for dividend paying companies where shareholder returns are expected to be driven largely by ongoing payouts.
For MDU Resources Group, the model uses a trailing dividend per share of US$0.662876, a return on equity of 6.764% and a payout ratio of 41.24%. That payout level suggests the dividend is being funded from earnings rather than relying entirely on external sources. The implied long term dividend growth rate is 3.41%, capped from an initial 3.97% estimate, with an expected growth input of 3.97%.
On these assumptions, the DDM output is an intrinsic value of about US$18.58 per share, compared with the recent share price around US$19.65. That implies the stock screens as roughly 5.8% overvalued on this dividend based view. In other words, the current price sits close to, but a little above, what this model suggests.
Result: ABOUT RIGHT
MDU Resources Group is fairly valued according to our Dividend Discount Model (DDM), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.
Approach 2: MDU Resources Group Price vs Earnings
P/E is a common way to look at value for companies that are generating profits, because it ties the share price directly to the earnings you are effectively paying for. A higher or lower P/E often reflects what the market is expecting in terms of growth and how risky those future earnings appear to be, so there is no single “right” P/E level for every company.
MDU Resources Group currently trades on a P/E of 20.98x. That sits slightly above the peer average of 20.19x and above the Gas Utilities industry average of 15.06x. Simply Wall St’s Fair Ratio for MDU Resources Group is 19.10x, which is its proprietary view of what the P/E might be given factors such as earnings growth, profit margins, industry, market cap and risk profile.
This Fair Ratio aims to give you a more tailored reference point than a simple comparison with peers or the wider industry. It adjusts for company specific characteristics rather than assuming all utilities should trade on the same multiple. Compared with the current P/E of 20.98x, the Fair Ratio of 19.10x suggests the shares are trading a bit above this model based estimate.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your MDU Resources Group Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as short, clear stories you build around your own assumptions for MDU Resources Group, linking what you think about its projects, regulation and capital plans to a financial forecast and then to a Fair Value that can be compared with the current price.
On Simply Wall St’s Community page, Narratives let you plug in views on future revenue, earnings and margins, then instantly see how your Fair Value stacks up against today’s share price so you can decide whether the stock looks closer to a buy, hold or sell for your situation.
These Narratives update automatically when new news, earnings or guidance arrives, so your Fair Value view does not stay frozen while the company and market keep moving.
For MDU Resources Group, one investor might build a bullish Narrative that lines up with a Fair Value around US$24.00 based on expectations for infrastructure investment, data center demand and cleaner energy projects. Another might build a more cautious Narrative closer to US$18.00 that reflects concerns about capital needs, regulatory risk and equity issuance. Seeing these side by side can help you decide which story feels more realistic to you.
Do you think there's more to the story for MDU Resources Group? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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