FORTIS INC. (FTS): what the price requires

At today's price, FORTIS INC. (FTS) is priced for -1.8% 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/FTS

Headline

FieldValue
TickerFTS
CompanyFORTIS INC.
Current price$57.63/sh

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin today26.6%
Implied growth-1.8%
Multiple paid15x operating income

Solve inputs: computed at a 7.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.4pp.

Reconcile: at the x-ray's 9.3% required return this reads ~7.1%/yr; the models below use their own rates.

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

ReferenceValue
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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
Asset1.97x5expensive
Earnings2.13x3expensive
Relative1.30x5expensive
Growth0.77x2justifies

Families that justify the price: 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 6.7%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$191.690.30xyesReference only (OCF-based, capex excluded): OCF $3.0B
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$58.660.98xyesP/E 20x (static sector reference · 2026-04), scenarios: 16.5x / 20.0x / 23.5x (bear / base = reference held flat / bull), EV/EBITDA 13x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$30.951.86xyesBV/sh $34.76, ROE (TTM) 8.2%, ke 9.3%
Two-Stage Excess ReturnAsset$29.181.97xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$46.311.24xyesRev $8.9B, growth 7% (input: historical growth; tapered), Terminal P/S: 2.7x / 3.2x / 3.8x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$30.001.92xyesEPS $2.50, growth 7% (input: historical EPS growth), PEG=2.93 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$6.139.40xyesNormalized EBIT (5y avg op income, one-time charges added back) $2.22B × (1−17%) / WACC 6.7% → EPV (no growth)
Residual IncomeAsset$28.901.99xyesBV $34.76 + 5yr PV of (ROE (TTM) 8.2% − Kₑ 9.3%) × BV; BV grows 5.4%/yr
Graham NumberAsset$44.221.30xyes√(22.5 × EPS $2.50 × BVPS $34.76) — Graham's conservative floor
EV/EBITDA RelativeRelative$56.311.02xyesEBITDA $4.08B × sector EV/EBITDA 13.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$46.601.24xyesEPS $2.50 × (8.5 + 2×6.9%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$26.492.18xyesBV $34.76 × (ROIC 5.1% / WACC 6.7%)
P/Sales SectorRelative$44.411.30xyesRevenue $8.95B × sector P/S 2.5x
PEG Fair ValueRelative$25.762.24xyesEPS $2.50 × (PEG 1.5 × growth 6.9% (input: historical EPS growth)) → PE 10.3x
Earnings YieldEarnings$27.032.13xyesEPS $2.50 / 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$24.2b
Net debt / NOPAT (after-tax)14.68x
Net debt / operating income (pre-tax)12.23x
Interest coverage2.2x
Share count CAGR (dilution)1.7%
Burning cashno

Bullet Takeaways

Bull Case

Valuing a regulated utility is unlike valuing almost anything else, and the bull case rests on understanding why. A utility does not compete for customers or set its own prices. It invests capital in poles, wires, pipes, and substations, and a regulator allows it to earn a set return on that invested capital, called the rate base. Growth is therefore not a market-share fight; it is arithmetic. The more the utility invests in needed infrastructure, the larger its rate base, and the larger the earnings the regulator permits. Fortis has turned this into a remarkably predictable machine: a $28.8 billion five-year capital plan is expected to grow its rate base from $42.4 billion in 2025 to $57.9 billion by 2030, a 7% compound annual rate.

That predictability is the whole product. Because the earnings growth is underwritten by regulatory frameworks rather than by economic demand, it is unusually insulated from recessions. People keep their lights on and their gas flowing regardless of the business cycle, and the regulator allows recovery of prudent investment either way. This is what funds the dividend, which Fortis has now raised for 52 consecutive years, and management guides 4% to 6% annual dividend growth through 2030 directly off the rate-base growth. A 52-year streak is not a marketing claim; it is the visible output of a business model that converts capital investment into allowed earnings with high reliability.

The demand backdrop has turned into a genuine tailwind. Management highlighted data-center-driven load growth as a new source of investment opportunity, the surge in electricity demand from AI computing and electrification that requires utilities to build more capacity. More load means more required infrastructure, which means a larger rate base and more allowed earnings, all within the same regulated framework. The relative-valuation methods recognize this, landing right around the current price, because a regulated utility executing a funded, multi-year capital plan into rising demand is exactly the kind of low-risk compounder that a sector earnings multiple is built to value. The bet the price makes is modest: essentially that Fortis keeps doing what it has done for half a century.

Bear Case

The advantage a regulated utility relies on is the stability of the spread between its allowed return and its cost of capital, and that spread is being squeezed. Fortis funds its enormous infrastructure base largely with debt, carrying net debt of about $24.6 billion against trailing operating income that covers interest only about 2.4 times. That is normal for a utility, but it makes the company acutely sensitive to interest rates. When borrowing costs rise, the utility's interest expense climbs immediately, while the allowed return that regulators grant on its rate base resets only periodically and with a lag. In a higher-for-longer rate environment, the gap between what Fortis pays for capital and what it is allowed to earn on that capital narrows, and the trailing return on equity, already around 8.2% against an estimated cost of equity near 9.3%, is below the hurdle. A utility earning less than its cost of capital is a sign that the regulatory return is not keeping pace with the cost of funding the growth.

The capital plan itself, the centerpiece of the bull case, is also the source of risk. Executing $28.8 billion of investment requires continuous access to debt and equity markets, and it depends on regulators in multiple jurisdictions approving the spending and the returns. Regulatory decisions are not guaranteed; allowed returns can be cut, cost recovery can be delayed, and political pressure to keep customer bills low can pressure the very returns the plan assumes. The plan also dilutes shareholders modestly, with share count growing as the company funds part of the program with equity. If rates stay elevated or regulators tighten, the 7% rate-base growth could translate into slower per-share earnings growth than the headline suggests.

The valuation leaves little room for any of that. The asset-based methods, built from book value near $34.76 per share, and the earnings-power methods, capitalizing current earnings, land well below the current price; only the forward-growth and relative-multiple methods reach it. The price requires the regulated growth machine to keep running smoothly through a rate environment that pressures its economics. A utility is a defensive holding, but it is also a bond-like instrument, and when interest rates are high and a company earns below its cost of capital, the case for paying a premium to book value rests entirely on the regulated growth continuing exactly as planned. The price assumes it does, with no discount for the rate and regulatory risk that could slow it.

Valuation

For a regulated utility, the price is best read against the regulated growth it is buying, and Fortis is priced as a steady compounder. At $56.10, the relative-multiple methods land right around the price, the forward-growth methods reach it, and the asset-based and earnings-power methods sit below it. That pattern is typical for a utility: the static methods value the current book and earnings, while the price credits the contractual-feeling growth of the rate base.

What the price actually requires is almost nothing in the way of acceleration. The inversion shows the price embeds essentially flat-to-slightly-negative growth in operating income, which for a company guiding to 7% annual rate-base growth and 4% to 6% dividend growth is an undemanding assumption. The market is not betting on Fortis surprising to the upside; it is paying for the regulated growth machine to keep delivering its planned, low-risk earnings progression. The reconciliation that matters is between the below-hurdle current return on equity, around 8.2% against a roughly 9.3% cost of equity, and the rate-base growth: the price assumes the capital plan and rising load lift earnings faster than the cost of funding them, even though the trailing return currently sits below the cost of capital. A sector earnings multiple near 20 times, which the relative methods use, lands the stock right at its price, confirming it is valued in line with utility peers.

Solvency is the part to weigh carefully, because a utility is a leveraged business by design. Fortis carries net debt of about $24.6 billion, with interest coverage near 2.4 times, which is adequate but leaves the company exposed to refinancing at higher rates. That debt is the normal cost of owning a rate base this large, and it is serviced by the predictable regulated cash flows, but it is also why the stock trades partly like a bond and is sensitive to interest-rate moves. The decisive variable is not any single fair-value estimate but the interplay of the regulated growth plan, the allowed returns regulators grant, and the cost of the debt that funds it. At today's price the stock is valued as a reliable utility compounder, and the buyer is underwriting that reliability continuing in a higher-rate world.

Catalysts

Fortis reported first-quarter 2026 results in May, with net earnings of CAD 501 million, or CAD 0.99 per share, a modest absolute increase but a one-cent decline in per-share earnings versus the prior-year quarter. Capital expenditures were $1.4 billion in the quarter, keeping the $5.6 billion annual capital program on track. For a regulated utility, the steady, on-plan execution is the story rather than any single quarter's swing.

The central forward driver is the capital plan. Fortis detailed a $28.8 billion five-year program expected to grow its midyear rate base from $42.4 billion in 2025 to $57.9 billion by 2030, a 7% compound annual growth rate, which underpins its guidance for 4% to 6% annual dividend growth through 2030. Management pointed to data-center-driven load growth and disciplined capital execution as supports for that plan, and the durability of that load growth is the key variable to watch.

The items most likely to move the fundamental story are regulatory decisions across the company's jurisdictions on allowed returns and cost recovery, the trajectory of interest rates given the debt-heavy balance sheet, and confirmation that the data-center and electrification demand translates into approved incremental investment. The next earnings reports will show whether the capital plan and rate-base growth continue tracking the multi-year targets.

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 2026 results, May 2026 · Q1 2026 results release, May 2026

View the full interactive FTS report on boothcheck