AVISTA CORP (AVA): what the price requires

At today's price, AVISTA CORP (AVA) is priced for -4.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/AVA

Headline

FieldValue
TickerAVA
CompanyAVISTA CORP
Current price$42.05/sh

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed8.6%
Operating margin today18.8%
Margin compression implied-10.2pp
Implied growth-4.6%
Multiple paid10x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~4.9pp.

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history-0.67σ
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.74x5expensive
Earnings1.55x3expensive
Relative0.75x5justifies
Growth0.89x4justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=17)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$53.200.79xyesReference only (OCF-based, capex excluded): OCF $0.5B
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$56.440.75xyesP/E 20x (static sector reference · 2026-04), scenarios: 16.9x / 20.0x / 23.1x (bear / base = reference held flat / bull), EV/EBITDA 13x
Simple DDMGrowth$116.940.36xyesDPS $1.99, g=7.4% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$42.360.99xyesStage 1: 7% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$27.041.56xyesBV/sh $33.71, ROE (TTM) 7.4%, ke 9.3%
Two-Stage Excess ReturnAsset$24.121.74xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$22.991.83xyesRev $1.9B, growth -1% (input: historical growth; tapered), Terminal P/S: 1.5x / 1.8x / 2.1x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$30.121.40xyesEPS $2.51, growth 7% (input: historical EPS growth), PEG=2.27 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$24.761.70xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.27B × (1−12%) / WACC 8.7% → EPV (no growth)
Residual IncomeAsset$23.681.78xyesBV $33.71 + 5yr PV of (ROE (TTM) 7.4% − Kₑ 9.3%) × BV; BV grows 4.8%/yr
Graham NumberAsset$43.630.96xyes√(22.5 × EPS $2.51 × BVPS $33.71) — Graham's conservative floor
EV/EBITDA RelativeRelative$62.680.67xyesEBITDA $0.43B × sector EV/EBITDA 13.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$48.980.86xyesEPS $2.51 × (8.5 + 2×7.4%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$14.212.96xyesBV $33.71 × (ROIC 3.7% / WACC 8.7%)
P/Sales SectorRelative$58.190.72xyesRevenue $1.92B × sector P/S 2.5x
PEG Fair ValueRelative$27.831.51xyesEPS $2.51 × (PEG 1.5 × growth 7.4% (input: historical EPS growth)) → PE 11.1x
Earnings YieldEarnings$27.141.55xyesEPS $2.51 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$402.0m
Net debt / NOPAT (after-tax)1.22x
Net debt / operating income (pre-tax)1.07x
Share count CAGR (dilution)3.4%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

The capital-allocation picture for Avista is the simplest version of the utility bargain: spend capital on the system, earn a regulated return on it, and pass most of the resulting earnings back to shareholders as a dividend. Avista pays a dividend yielding close to 5%, near $1.97 a share for 2026, with a payout covered by earnings and a long history of annual increases. For an income-oriented holder, that is the core of the case: a cash return well above the market average, backed by the most predictable earnings stream in the economy, the regulated delivery of electricity and gas that customers buy regardless of the business cycle.

The valuation is where Avista stands apart from the typical premium utility. At $39.83 the stock trades at only about 14 times company-wide operating income, a multiple so low that the price sits below what even a modest decline in operating profit would warrant. The relative-multiple methods make the point directly: applied at a sector price-to-earnings near 20 times, they land well above the current price, and an EV-to-EBITDA comparison lands higher still. Unlike the richly valued names in the sector, Avista is priced as a value utility, which means an investor is paid the high yield without overpaying for the underlying earnings.

The reinvestment runway supports the dividend and modest growth. Avista plans roughly $615 million of capital expenditure in 2026 within a $3.4 billion five-year plan, the system investment that, once recovered in rates, grows the earnings base. Management targets long-term utility earnings growth of 4% to 6%, which combined with the near-5% yield is a respectable total-return profile for a defensive holding. First-quarter results moved the right way, with earnings of $1.11 a share up from $0.98 a year earlier and full-year guidance confirmed. The bull case is a cheaply priced, high-yield regulated utility with a clear capital plan: not a grower to get excited about, but a defensive income holding bought at a discount to where the methods say the earnings belong.

Bear Case

The structural problem with Avista is that it does not earn what regulators allow it to, and that gap is the bear case. Its return on equity of about 7.4% sits below its cost of equity, which means the utility is, in economic terms, not quite covering the cost of the capital it deploys. The cause is regulatory lag: a utility spends capital today but only recovers it, and earns a return on it, after a rate case concludes, often a year or more later, and frequently for less than it requested. The 10-K is explicit about the risk of "disallowance or delay in the recovery of capital investments, operating costs, commodity costs" and warns that if regulators "grant substantially lower rate increases than our requests," the earned return suffers. A utility that chronically under-earns its authorized return is one whose growth plan creates less shareholder value than the headline rate-base figures suggest, because each new dollar invested earns a sub-cost-of-capital return until the next rate case catches up.

The Pacific Northwest setting adds a specific tail risk: wildfire. Western utilities have learned that a single fire linked to their equipment can produce liabilities that dwarf their market value, and Avista operates in fire-prone territory. The company is spending on wildfire mitigation, which is prudent, but mitigation is a cost that pressures the already-thin earned return, and the residual liability risk is the kind that does not show in the numbers until a catastrophic event. It is the asymmetric risk a utility holder accepts in exchange for the steady dividend.

The near-term growth lever just got weaker. Avista had been pursuing a large data-center load, the kind of new demand that lets a utility grow its rate base faster, but it paused those negotiations to align with regulators and community stakeholders, removing a visible upside catalyst at least for now. Meanwhile the financing of the capital plan dilutes holders: the company expects up to $90 million of new stock issuance in 2026, on top of new debt, to fund the spend. On valuation, the picture is genuinely mixed: the relative-multiple methods say the stock is cheap, but the asset-based methods say it is expensive, because a utility earning below its cost of equity does not deserve a premium to its book value of about $33.71 a share, and the stock trades above that. The bear case is that Avista is cheap for a reason, a low-ROE utility with regulatory lag, wildfire exposure, and a faded near-term growth catalyst, and the near-5% yield is the compensation for owning a business that struggles to earn its keep.

Valuation

Avista is a value utility, and the methods agree it is inexpensive on its earnings while flagging why the cheapness is deserved. At $39.83 the stock trades at roughly 14 times company-wide operating income, a multiple so low that the price sits below what even a 5%-a-year decline in operating profit would warrant. The relative-multiple methods reinforce that read: applied at a sector price-to-earnings near 20 times, they land well above the price, and an enterprise-value-to-EBITDA comparison lands higher still. On a pure multiple basis, Avista is cheap relative to the sector, and the framework reads the priced-in assumption as broadly within range, requiring no heroic growth.

The families of method split in a way that is itself the diagnosis. The relative-multiple methods say the stock is cheap. But the asset-based methods, which anchor on the book value near $33.71 a share and the actual return on equity, say the stock is expensive, because a utility earning a roughly 7.4% return on equity, below its cost of equity, does not deserve to trade at a premium to its book value, and the price sits above book. That tension is the whole story: Avista looks cheap on an earnings multiple and rich on an asset-return basis, and the reconciliation is that the market is discounting the earnings precisely because the utility under-earns its allowed return. The dividend-based methods, which capitalize the high payout, land well above the price, which is why the income case is the strongest version of the bull argument. The honest read is that Avista is cheap if you believe rate cases close the earned-versus-authorized gap, and fairly valued if the regulatory lag persists.

The balance-sheet frame for a utility is capital adequacy and the dividend, not leverage in the industrial sense. Avista funds its capital plan with a mix of new debt and equity, including up to $90 million of stock issuance in 2026, which dilutes per-share value modestly, and the dividend payout near 83% of earnings is high but covered. The relevant risks are not solvency but the earned return, the wildfire liability tail, and whether rate cases grant enough to lift the return on equity toward the authorized level. The buyer at today's price is paid a near-5% yield to own a discounted, defensive regulated utility, accepting low returns and Pacific Northwest wildfire exposure as the trade. Published analyst targets cluster right around the current price, with a median near $40 and a range into the high $40s, reflecting a market that sees the stock as roughly fairly valued, attractive for yield but capped by the low earned return.

Catalysts

The first quarter of 2026 confirmed the steady-as-it-goes story. Avista reported GAAP net income of $92 million, or $1.11 per diluted share, up from $0.98 a year earlier, and confirmed its full-year 2026 non-GAAP utility earnings guidance of $2.52 to $2.72 per share. The capital and financing plan behind it is set: roughly $615 million of capital expenditure in 2026 within a $3.4 billion five-year plan, funded with up to $90 million of stock issuance and $230 million of long-term debt, supporting a long-term earnings growth target of 4% to 6%. The catalysts that matter are the rate-case outcomes that determine whether Avista's earned return rises toward its authorized level, since the earned-versus-authorized gap is the central drag on the stock.

Two developments frame the upside and the risk. On the upside, Avista had been negotiating to serve a large data-center load, the kind of new demand that accelerates rate-base growth, but it paused those talks to align with regulators and community stakeholders, deferring a visible catalyst. On the income side, the dividend yields close to 5% and has a long record of increases, the core attraction for the stock's holders. Analyst sentiment is neutral, with most ratings at hold and price targets clustered around the current level, reflecting a market that values the yield while waiting for evidence the earned return improves. The next earnings report and the progress of pending rate cases are the events that will determine whether the value-utility discount narrows.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 FY2026 results, May 2026 · company disclosures, 2026 · analyst consensus, TipRanks / Simply Wall St, 2026

View the full interactive AVA report on boothcheck