MGE Energy, Inc. (MGEE): what the price requires

At today's price, MGE Energy, Inc. (MGEE) is priced for -1.4% 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/MGEE

Headline

FieldValue
TickerMGEE
CompanyMGE Energy, Inc.
Current price$82.40/sh
CompositionElectric 71% / Gas 28% / Non-Regulated Energy 0%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Implied growth-1.4%
Multiple paid20x operating income

Solve inputs: computed at a 6.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8.1pp.

Reconcile: at the x-ray's 9.3% required return this reads ~16.9%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.82σ
cohort percentile (of 70 peers)49
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
Asset1.83x5expensive
Earnings1.95x3expensive
Relative1.57x5expensive
Growth0.81x2justifies

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

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.0%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$183.410.45xyesReference only (OCF-based, capex excluded): OCF $0.3B
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$67.281.22xyesP/E 20x (static sector reference · 2026-04), scenarios: 16.5x / 20.0x / 23.5x (bear / base = reference held flat / bull), EV/EBITDA 15.99x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$42.151.95xyesBV/sh $36.85, ROE (TTM) 10.6%, ke 9.3%
Two-Stage Excess ReturnAsset$44.981.83xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$70.161.17xyesRev $0.8B, growth 9% (input: historical growth; tapered), Terminal P/S: 3.2x / 3.9x / 4.6x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$46.801.76xyesEPS $3.90, growth 9% (input: historical EPS growth), PEG=2.24 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$14.575.66xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.15B × (1−21%) / WACC 8.0% → EPV (no growth)
Residual IncomeAsset$45.511.81xyesBV $36.85 + 5yr PV of (ROE (TTM) 10.6% − Kₑ 9.3%) × BV; BV grows 6.9%/yr
Graham NumberAsset$56.861.45xyes√(22.5 × EPS $3.90 × BVPS $36.85) — Graham's conservative floor
EV/EBITDA RelativeRelative$35.802.30xyesEBITDA $0.17B × sector EV/EBITDA 13.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$89.500.92xyesEPS $3.90 × (8.5 + 2×9.4%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$8.549.65xyesBV $36.85 × (ROIC 1.9% / WACC 8.0%)
P/Sales SectorRelative$52.391.57xyesRevenue $0.77B × sector P/S 2.5x
PEG Fair ValueRelative$55.231.49xyesEPS $3.90 × (PEG 1.5 × growth 9.4% (input: historical EPS growth)) → PE 14.2x
Earnings YieldEarnings$42.161.95xyesEPS $3.90 / 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$951.2m
Net debt / NOPAT (after-tax)6.29x
Net debt / operating income (pre-tax)4.97x
Share count CAGR (dilution)0.3%
Burning cashno

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

Bullet Takeaways

MGE Energy is a small, well-run Wisconsin regulated utility, about 71% electric and the rest gas, serving the Madison area. Q1 2026 GAAP EPS rose to $1.32 from $1.14 on higher electric and gas revenues and new rates, with rate base growing on renewable projects.

The stock carries a premium. At about $76 the price sits well above nearly every valuation frame: the blended X-ray is near $46, and only the growth-DCF reaches the price. The market is paying for the quality and consistency, not for a cheap multiple.

The dividend is the franchise. MGE Energy just raised its payout for the 49th consecutive year, approaching Dividend King status, at about $1.90 a share for a 2.6% yield. The growth comes from regulated renewable investment (solar, wind, battery), funded in part by recent equity offerings.

Bull Case

Lead with where the price sits relative to the methods, because for MGE Energy that distance is the entire debate. At about $76 the stock trades above almost every valuation frame: earnings power value near $15, simple excess return near $42, EV/EBITDA relative near $36, relative valuation near $66, with a blended X-ray near $46. Only the growth-DCF reaches the price. For most companies that pattern is a warning. For a regulated utility with MGE's record, it is the market pricing a durability premium that the static frames structurally cannot capture, because they cannot see decades of uninterrupted, rate-base-driven compounding.

The quality is real and the numbers back it. Q1 2026 GAAP earnings rose to $48.5 million, or $1.32 per share, from $41.6 million ($1.14) a year earlier, on total operating revenue up to $242.7 million from $219.0 million, driven by higher electric and gas revenues and new rates effective in 2026. The electric segment alone added $5.5 million of earnings, which the company tied to "strategic capital investments that grew rate base," largely through renewable projects. That is the regulated growth engine: invest approved capital, grow the rate base, earn the allowed return, repeat. The current trailing operating margin near 22% reflects a clean, focused utility.

The dividend is the proof of the franchise and the core of the return. MGE Energy just raised its dividend for the 49th consecutive year, putting it within striking distance of Dividend King status, at about $1.90 per share for a 2.6% yield. The 10-K shows the regulated structure protecting that payout, noting a dividend restriction that applies only "if MGE's common equity ratio... is less than 55%," a restriction that "did not restrict MGE's payment of dividends in 2025." A utility that has grown its dividend for nearly half a century, is expanding its rate base through renewables, and benefits from tax credits that lowered its effective tax rate to about 10.8% has the kind of slow, reliable compounding that justifies a premium multiple. The inversion implies essentially no growth is required (about negative 1.2%), so the bar the price sets is low.

Bear Case

Set MGE Energy against its regulated-utility peers and the bear case is about the premium, because on valuation MGEE competes with names like Black Hills, IDACORP, Spire, and Portland General for income investors' dollars, and it is priced richer than most of them while offering a similar regulated-monopoly profile. The conservative frames that work across the whole peer group say MGEE is expensive: earnings power value near $15, the asset frames in the $42 to $46 range, all far below the roughly $76 price. When a small utility trades at a meaningful premium to the methods that value its peers, the premium itself is the risk: it can compress toward the group simply because another regulated utility offers the same dividend safety at a lower multiple. An analyst consensus that skews to Sell and Hold (zero Buys among the small coverage) reflects exactly that, with several views calling the shares slightly overvalued.

The growth is being bought with shareholder dilution, which the premium does not advertise. To fund its renewable capital program, MGE Energy completed a $250 million follow-on stock offering in early May 2026 (about 3.3 million shares at $75.75) and filed an additional $175 million offering. Issuing equity to fund rate-base growth is normal for a capital-intensive utility, but it means existing holders are being diluted to finance the growth that justifies the premium, and issuing shares is most expensive when the stock trades above its asset value, which is precisely MGE's situation. Capital expenditures more than doubled to $101.1 million in the quarter, so the dilution is set to continue.

The leverage and regulatory dependence cap the upside. Net debt of about $951 million sits at roughly 5.6 times trailing operating income, typical for a utility but a reminder that the model relies on continuous access to capital at reasonable rates. The earnings also lean on favorable tax treatment: the effective tax rate fell to 10.8% on renewable and storage tax credits, a tailwind that can fade if federal policy shifts. The bear conclusion is that MGE Energy is a high-quality utility trading at a high-quality price, where the dividend safety is genuine but the premium multiple, the ongoing equity dilution, and the dependence on supportive rate cases and tax policy leave little room for error and modest expected return from here.

Valuation

MGE Energy is best read as a premium regulated utility, where the value is the rate base and allowed return, and the price sits clearly above the standard frames. The conservative methods cluster well below the price: earnings power value near $15, simple excess return near $42, two-stage excess return near $45, EV/EBITDA relative near $36, with a blended X-ray near $46 against the roughly $76 price. Relative valuation lands near $66, closer but still below, and only the perpetual-growth DCF (near $188) reaches and exceeds the price. The system characterizes this as the classic durability-premium pattern: asset, earnings-power, and peer-multiple frames all say richly valued, and only the growth-DCF justifies the tape.

The inversion reads the price as undemanding on growth, implying about negative 1.2% operating-profit growth, which makes sense for a slow-growing utility, but it does not resolve the premium-to-assets question. The sensitivity is high at about 7.7 points of implied growth per point of cost of capital, which matters because a utility's value is rate-sensitive, and the reliability of the solve is rated ok.

The honest synthesis: MGE Energy is not cheap on any frame anchored to current assets or earnings; it is expensive on those and fair only on the growth-DCF and against the steady dividend. The justification is the quality, the 49-year dividend-increase record, the regulated rate-base growth funded by renewable investment, and the durability that the static frames cannot price. The risk is that the premium compresses toward peer utilities offering similar safety at lower multiples, especially while MGE issues equity above its asset value to fund growth. For an income investor the roughly 2.6% yield, growing steadily, is the return; for a value investor the price already reflects the quality and leaves little margin.

Catalysts

Q1 2026 (reported May 5) was a solid quarter: GAAP EPS of $1.32 (up from $1.14), with total operating revenue rising to $242.7 million from $219.0 million on higher electric and gas revenues and new 2026 rates. The electric segment added $5.5 million of earnings tied to rate-base growth from renewable projects, and the effective tax rate fell to 10.8% on renewable and storage tax credits.

The growth program is renewable capital investment: capital expenditures more than doubled to $101.1 million on solar, wind, battery, and storage projects, which expand the regulated rate base. To fund it, MGE Energy completed a $250 million follow-on stock offering in early May (about 3.3 million shares at $75.75) and filed an additional $175 million offering.

The dividend is the headline draw: a 49th consecutive annual increase, approaching Dividend King status, at about $1.90 per share for a 2.6% yield.

Analyst sentiment is cautious on valuation: a consensus that skews to Sell and Hold (no Buys among the small coverage) with an average target near $76 to $81, around the current price. The swing factors are rate-case outcomes in Wisconsin, the pace and cost of the renewable capital program, the dilution from continued equity issuance, and the durability of the renewable tax credits that are currently lowering the tax rate.

Peer Cohorts (Per Segment, With Filing Citations)

Electric (reported)

Gas (reported)

Non-Regulated Energy / Transmission Investment (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 MGEE report on boothcheck