BLACK HILLS CORP /SD/ (BKH): what the price requires

At today's price, BLACK HILLS CORP /SD/ (BKH) is priced for -3.2% 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: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/BKH

Headline

FieldValue
TickerBKH
CompanyBLACK HILLS CORP /SD/
Current price$75.91/sh
CompositionRetail 82% / Transportation 8% / Wholesale 1% / Market - off-system sales 2% / Transmission 2% / Other revenues 4% / Alternative revenue and other 1%

What The Price Requires (Inversion)

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

FieldValue
Inversion basissegment
Implied growth-3.2%

Solve inputs: computed at a 6.3% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~9pp.

Reconcile: at the x-ray's 9.3% required return this reads ~19.8%/yr; the models below use their own rates.

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

ReferenceValue
cohort percentile (of 70 peers)59
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power/growth-DCF 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
Asset2.08x5expensive
Earnings1.96x3expensive
Relative1.00x5justifies
Growth1.62x3expensive

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

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.7%); the inversion above states its own rate.

Per-Model Detail (n=16)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——noReference only (OCF-based, capex excluded): OCF $0.6B
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$81.870.93xyesP/E 20x (static sector reference · 2026-04), scenarios: 16.7x / 20.0x / 23.3x (bear / base = reference held flat / bull), EV/EBITDA 13x
Simple DDMGrowth$155.210.49xyesDPS $2.81, g=7.3% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$46.851.62xyesStage 1: 2% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$41.231.84xyesBV/sh $52.19, ROE (TTM) 7.3%, ke 9.3%
Two-Stage Excess ReturnAsset$36.452.08xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$45.791.66xyesRev $2.3B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.1x / 2.5x / 2.9x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$46.081.65xyesEPS $3.84, growth 2% (input: historical EPS growth), PEG=11.36 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$33.642.26xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.49B × (1−12%) / WACC 5.7% → EPV (no growth)
Residual IncomeAsset$35.742.12xyesBV $52.19 + 5yr PV of (ROE (TTM) 7.3% − Kₑ 9.3%) × BV; BV grows 4.7%/yr
Graham NumberAsset$67.151.13xyes√(22.5 × EPS $3.84 × BVPS $52.19) — Graham's conservative floor
EV/EBITDA RelativeRelative$83.740.91xyesEBITDA $0.82B × sector EV/EBITDA 13.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$38.641.96xyesEPS $3.84 × (8.5 + 2×1.8%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$19.663.86xyesBV $52.19 × (ROIC 2.1% / WACC 5.7%)
P/Sales SectorRelative$75.581.00xyesRevenue $2.29B × sector P/S 2.5x
PEG Fair ValueRelative$19.203.95xyesEPS $3.84 × (PEG 1.5 × growth 1.8% (input: historical EPS growth)) → PE 2.6x
Earnings YieldEarnings$41.511.83xyesEPS $3.84 / 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$4.6b
Net debt / NOPAT (after-tax)9.23x
Net debt / operating income (pre-tax)8.15x
Interest coverage2.8x
Share count CAGR (dilution)4.0%
Burning cashno

Bullet Takeaways

Black Hills is a regulated electric and gas utility with a 56-year dividend-increase record, a structural monopoly franchise, and cost-recovery mechanisms that pass commodity costs through to customers.

Growth rests on rate base: a data-center pipeline of more than 3 gigawatts (1.8 gigawatts reserved) supports 2026 adjusted EPS guidance of 4.25 to 4.45 dollars and a long-term target in the upper half of 4 to 6 percent.

The risk is the balance sheet: about 4.63 billion dollars of net debt at 8.7 times operating income with 2.7 times interest coverage, plus a trailing return on equity of 7.3 percent that sits below the cost of equity, leaving the premium dependent on delivering rate-base growth.

Bull Case

The structural advantage that defines Black Hills is its regulatory franchise, and it shows up directly in the return data. As a regulated electric and gas utility, the company holds legal monopolies in the territories it serves and earns a return set by state commissions on the capital it invests. The 10-K describes the mechanics of that protection plainly, noting tariff mechanisms that "allow the utility operating in that state to collect or refund the difference" in the cost of natural gas, fuel, and purchased power passed through to customers (accession 0000950170-25-018647). That pass-through insulates earnings from commodity swings and keeps the utility's return tied to its rate base rather than to volatile input costs. It is a narrow moat, but a durable one, and it is why the company has raised its dividend for 56 consecutive years, one of the longest streaks in the entire market.

The growth on top of that base is what makes this more than a bond substitute. Black Hills is advancing a data-center pipeline of more than 3 gigawatts, including a reserved 1.8 gigawatt project, with 600 megawatts already in its five-year plan. Large-load customers like data centers expand the rate base the utility earns a return on, and the 10-K frames the discipline around that investment in terms of "regulatory cost recovery, and return on investment" (accession 0000950170-25-018647). That demand is the difference between a flat utility and one that can grow earnings at the upper half of its 4 to 6 percent target.

The near-term numbers confirm the trajectory. Management initiated and reaffirmed 2026 adjusted EPS guidance of 4.25 to 4.45 dollars, about 6 percent growth over 2025, and the quarterly dividend stands at 0.703 dollars per share for a yield near 3.9 percent. A regulated monopoly with a 56-year dividend record, a data-center-driven rate-base tailwind, and mid-single-digit EPS growth is the classic defensive compounder. The bull case is that the market still prices it like a no-growth utility while the load-growth story quietly lifts the base it earns on.

Bear Case

The fragility in Black Hills is on the balance sheet, which is the defining feature of any regulated utility but is especially worth scrutiny here given the growth ambitions. The company carries about 4.63 billion dollars of net debt against trailing operating income of 534 million, putting net debt at roughly 8.7 times operating income with interest coverage of only about 2.7 times. Utilities are built to run with leverage because their cash flows are stable, but that model has a specific vulnerability: it depends on continuous access to capital markets at reasonable rates. The same 10-K that touts cost recovery acknowledges the dependence on "governmental approvals and permitting, regulatory cost recovery, and return on investment" (accession 0000950170-25-018647). When any link in that chain, financing, permitting, or a rate-case outcome, tightens, a thinly covered balance sheet has little slack.

Interest-rate sensitivity compounds the concern. A utility funds its rate base with heavy debt, and it issues equity to maintain its capital structure, diluting shareholders at a roughly 4 percent annual pace. In a higher-for-longer rate environment, refinancing the existing stack costs more, new capital projects clear lower returns, and the stock competes against risk-free yields that have risen. The data-center buildout the bull case celebrates is itself capital-intensive and front-loads spending and financing risk before the earnings arrive. If a major project slips or a commission denies timely recovery, the company is left carrying the debt without the offsetting revenue.

The valuation methods reflect this tension. Anchored on a trailing return on equity of 7.3 percent, which sits below the 9.3 percent cost of equity, the asset and earnings-power models land well below the price, between roughly 35 and 41 dollars. The two-stage dividend-discount read lands near 47 dollars. Only the relative-multiple read at a sector P/E reaches the low 80s. The price at about 73 dollars is therefore supported almost entirely by the assumption that Black Hills trades like its larger utility peers; on its own returns and cash flows, the conservative methods say it is expensive. A utility earning below its cost of equity, priced at a premium to book, is a bet on the rate-base growth showing up.

Valuation

Black Hills is valued segment by segment, and the segment carrying the priced-in premium is the gas-utility business, where the price implies operating growth of about 1.9 percent per year for five years, computed at a 7 percent cost of capital with 4 percent terminal growth. For a regulated utility that is an undemanding bar, which is why the priced-in assumption reads as within range. The catch is that the company as a whole earns a trailing return on equity of about 7.3 percent, below its 9.3 percent cost of equity, so the methods that hold returns to that level land below the price.

The model families split predictably for a utility. The relative-valuation read at a sector P/E near 20 times lands in the low 80s, just above the price, and the EV/EBITDA read near 84 dollars agrees, because the market prices Black Hills against its peer group rather than its standalone return. The dividend-discount family is wide: a simple version that capitalizes the growing dividend lands above 150 dollars, while the more conservative two-stage version lands near 47 dollars, and the truth sits between depending on how durable dividend growth proves. The asset and earnings-power families, anchored on the sub-cost-of-equity return, cluster between roughly 35 and 41 dollars, the conservative floor. The Graham-number read near 67 dollars is the closest of the value methods to the price.

The honest synthesis is that Black Hills is fairly priced as a peer-group utility and expensive on its own current returns. The bridge between the two is rate-base growth, particularly the data-center load that would lift the base it earns on and push returns toward the cost of equity. The balance sheet can carry that plan as long as capital markets stay open and rate cases are constructive, but the leverage leaves little margin. The buyer at 73 dollars is paying a peer multiple today for a return improvement that has to be delivered through regulation and load growth tomorrow.

Catalysts

The earnings and guidance cadence is the steady catalyst. Black Hills reaffirmed its 2026 adjusted EPS guidance of 4.25 to 4.45 dollars, about 6 percent growth over 2025, after reporting first-quarter 2026 adjusted EPS of 1.79 dollars (StockTitan, MarketBeat). The guidance assumes constructive and timely outcomes in utility rate cases and an effective tax rate near 14 percent, so each regulatory docket resolution is a discrete catalyst.

The data-center load-growth story is the structural catalyst that could re-rate the stock. Black Hills is advancing a pipeline of more than 3 gigawatts, including 600 megawatts in its five-year plan and progress on a reserved 1.8 gigawatt project (Globe and Mail). Each step toward firm, contracted large-load customers expands the rate base and supports the upper-half-of-4-to-6-percent EPS growth target.

Corporate action and the dividend are additional catalysts. The company has flagged a NorthWestern Energy merger update in its disclosures, a transaction that would materially change scale and the combined rate base if completed (Black Hills 8-K). On the income side, the board declared a quarterly dividend of 0.703 dollars per share, extending the 56-year streak of annual increases. The watch items are the merger's progress, the data-center contract milestones, rate-case outcomes, and the interest-rate path that governs financing cost for a leveraged utility.

Peer Cohorts (Per Segment, With Filing Citations)

Electric Utilities (reported)

Gas Utilities (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.

View the full interactive BKH report on boothcheck