PUBLIC SERVICE ENTERPRISE GROUP INC (PEG): what the price requires
At today's price, PUBLIC SERVICE ENTERPRISE GROUP INC (PEG) is priced for -2.4% 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: 2026-07-16 · Source: https://boothcheck.com/report/PEG
Headline
| Field | Value |
|---|---|
| Ticker | PEG |
| Company | PUBLIC SERVICE ENTERPRISE GROUP INC |
| Current price | $80.97/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 11.1% |
| Operating margin today | 27.1% |
| Margin compression implied | -16.0pp |
| Implied growth | -2.4% |
| Multiple paid | 18x 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 7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.6pp (computed at the 7% minimum rate; the CAPM rate 6.7% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~13.4%/yr; the models below use their own rates.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | -0.08σ |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; 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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.40x | 5 | expensive |
| Earnings | 1.66x | 3 | expensive |
| Relative | 1.03x | 5 | expensive |
| Growth | 0.85x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.1%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| DCF Exit Multiple | Growth | $109.97 | 0.74x | yes | Exit EV/EBITDA: 17.8x / 19.8x / 21.8x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $78.41 | 1.03x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.2x / 20.0x / 23.8x (bear / base = reference held flat / bull), EV/EBITDA 15.04x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $94.76 | 0.85x | yes | Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $48.93 | 1.65x | yes | BV/sh $34.61, ROE (TTM) 13.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $57.69 | 1.40x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $86.51 | 0.94x | yes | Rev $12.9B, growth 18% (input: historical growth; tapered), Terminal P/S: 2.5x / 3.1x / 3.7x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $101.32 | 0.80x | yes | EPS $4.52, growth 22% (input: historical EPS growth), PEG=0.80 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $8.26 | 9.80x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.98B × (1−13%) / WACC 6.1% → EPV (no growth) |
| Residual Income | Asset | $59.55 | 1.36x | yes | BV $34.61 + 5yr PV of (ROE (TTM) 13.1% − Kₑ 9.3%) × BV; BV grows 8.5%/yr |
| Graham Number | Asset | $59.32 | 1.36x | yes | √(22.5 × EPS $4.52 × BVPS $34.61) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $36.72 | 2.20x | yes | EBITDA $3.26B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $0.01 | 8096.50x | yes | FCF $183.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median) |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $145.85 | 0.56x | yes | EPS $4.52 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $12.82 | 6.32x | yes | BV $34.61 × (ROIC 2.3% / WACC 6.1%) |
| P/Sales Sector | Relative | $64.69 | 1.25x | yes | Revenue $12.94B × sector P/S 2.5x |
| PEG Fair Value | Relative | $151.98 | 0.53x | yes | EPS $4.52 × (PEG 1.5 × growth 22.4% (input: historical EPS growth)) → PE 33.6x |
| Earnings Yield | Earnings | $48.86 | 1.66x | yes | EPS $4.52 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $23.9b |
| Net debt / NOPAT (after-tax) | 7.70x |
| Net debt / operating income (pre-tax) | 6.73x |
| Interest coverage | 3.5x |
| Share count CAGR (dilution) | 0.0% |
| Burning cash | no |
Bullet Takeaways
- PSEG runs almost entirely as a regulated New Jersey wire and pipe business, with PSE&G serving 2.4 million electric and 1.9 million gas customers across a 2,600-square-mile service area, and a 2026 to 2030 capital plan the company sizes at "$22.5 billion to $25.5 billion" aimed at a regulated rate base growing 6.0% to 7.5% a year.
- The largest risk is leverage and rate-case dependency: net debt sits near $23.9 billion against trailing operating profit, interest coverage runs about 3.1 times, and every dollar of that capital program earns a return only once a state commission approves the recovery.
- Next to watch is whether the carbon-free nuclear fleet converts surging regional power demand into premium long-term contracts, after Jefferies cut the stock to Hold in 2026 citing reduced confidence on existing-plant data center deals.
Bull Case
Start with where the price lands against the methods, because for a utility that pattern is the whole argument. The peer-multiple methods place PSEG within a hair of today's price, and the growth methods that credit the capital program reach above it. The earnings-power methods, which value the business as if it never grows again, say expensive. That split is exactly what you would expect from a regulated utility in the middle of a heavy investment cycle: priced today for the rate base it is building, not the earnings it has already booked. The relative lens has the price almost dead-on a 20x sector earnings multiple, and the discounted cash-flow methods clear it. Only the zero-growth earnings anchor falls far below, and a zero-growth anchor is the wrong frame for a company spending more than $20 billion to grow its asset base by half this decade.
The mechanic underneath is the least exciting thing in finance and that is the point. PSEG earns an allowed return on capital it sinks into poles, wires, substations, and gas mains, and the regulator lets it recover that investment plus a return through rates. The FY2025 10-K describes the engine plainly: the 2026 to 2030 program is sized at "$22.5 billion to $25.5 billion", and the company expects it "to result in a compound annual growth rate in our regulated rate base in a range of 6.0% to 7.5% from year-end 2025 to year-end 2030." Over 90% of that spend is regulated. The recovery is not abstract, either. The filing details a working machinery of approved trackers, with the state board having approved "the return on and of PSE&G's capital investments and customer incentives, and recovery of incremental operating costs of the program" on its infrastructure programs. A utility that can put capital to work and earn a contracted return on it has a clearer path to growth than most businesses that have to win every customer twice.
Then there is the part the market is starting to pay attention to: the nuclear fleet. PSEG's Salem and Hope Creek stations produce carbon-free power around the clock, and the 10-K notes the federal production tax credit accrues per "megawatt hour (MWh) subject to adjustment based upon a facility's gross receipts and meeting prevailing wage rules," which puts a floor under nuclear economics. The optionality on top is data centers. Management has pointed to regional load growth and the possibility of premium-priced power purchase agreements with hyperscale and large industrial customers, plus a capacity uprate at Salem. None of that is in the regulated base. If even a fraction of it lands, it sits as upside on a business whose floor is already a contracted return on a growing pile of regulated assets.
Bear Case
The bear case starts not with the multiple but with what the regulated model actually requires: a state commission to keep saying yes. PSEG's growth is only as real as the rate recovery behind it, and that recovery is a sequence of pending decisions, not a guarantee. The 10-K is candid about the queue. A 2026 filing "requests the return on and of investment for GSMP II Ext gas investments placed in service through October 31, 2025. This matter is pending." Each tranche of the $22.5 to $25.5 billion program follows the same path: spend first, then ask New Jersey's board to let you earn on it. A less constructive regulatory posture, a disallowance, or a lag between spend and recovery does not show up as a headline failure. It shows up as the allowed return drifting below what the capital cost, quietly, over years.
The balance sheet is where that risk compounds. Net debt sits near $23.9 billion, roughly seven times trailing operating income, with interest coverage around 3.1 times. That is a heavily levered structure by design, because regulated utilities fund rate base with debt and recover the interest through rates. It works as long as two things hold: rates clear the cost of capital, and refinancing stays cheap. Both are outside management's control. A higher-for-longer rate environment raises the cost of every refinanced maturity and every new dollar of the capital plan, while the allowed return resets only slowly through rate cases. The share count has not moved in years, so there is no buyback cushion absorbing the financing, and there is no excess cash either. The downside floor here is regulated asset value and a contracted return, not a fortress of net cash.
The competitive pressure the bulls lean on cuts both ways. The data center thesis is real demand, but it is also contested. Jefferies downgraded the stock to Hold in 2026 with a price target trimmed to $89, specifically citing lower confidence on existing-plant data center deals. The premium nuclear contracts that would justify a re-rating remain prospective, and management itself has noted that in-state data center interest plateaued for lack of tax incentives. The price already credits the regulated growth and a slice of the nuclear optionality; if the optionality stays prospective and the regulated returns merely meet allowed levels, the stock is a 6% to 8% earnings grower trading like one, with little margin for a recovery stumble.
Valuation
The price is making an ordinary bet for a utility mid-build: that the regulated rate base grows roughly 6% to 7.5% a year and that the allowed returns on it hold. At today's price the relative-multiple lens reads PSEG at about a 20x earnings multiple, which the FY2025 EPS of $4.52 and a sector-median multiple put almost exactly at the current price. The market is paying for the growth program, not discounting it.
The disagreement among the methods is the informative part. The peer-multiple methods land essentially at the price. The growth methods that credit the rate base reach above it, with the discounted cash-flow exit-multiple approach clearing the price by holding today's enterprise multiple flat over a seven-year forecast. The earnings-power methods, which strip out growth and value only the current sustainable profit stream, fall well below. The spread is the premium for growth that has been committed but not yet earned.
Solvency is where the downside lives. Net debt near $23.9 billion against trailing operating income is roughly seven times leverage, with coverage around 3.1 times. That is not distress for a regulated utility, but it is not a cushion either, and the share count has been flat, so there is no buyback offsetting the financing. The bet the buyer is underwriting is straightforward to state: regulated rate base compounds in the high single digits, the commission keeps approving recovery on schedule, and the nuclear fleet eventually adds contract income the regulated base does not contain. The first holds with the highest confidence, the third is the call option, and the leverage is the constraint that ties the two together.
Catalysts
PSEG reaffirmed full-year 2026 operating earnings guidance of $4.28 to $4.40 per share after a Q1 2026 beat, with operating EPS of $1.55 against forecasts of roughly $1.43. Management frames the long-term plan around 6% to 8% compounded earnings growth through 2030, anchored on the regulated capital program and the 6% to 7.5% rate base CAGR. The next regulated catalysts are the pending recovery filings the 10-K describes, including the gas system modernization extension awaiting a return decision; each approval converts spend already in service into earning rate base.
The swing factor is nuclear. Management has flagged premium-priced power purchase agreements with data centers and large industrial customers as upside outside the regulated base, plus a Salem capacity uprate of nearly 200 MW gross, of which the PSEG share is roughly 112 MW. The counterweight is sentiment: Jefferies moved the stock to Hold in 2026 with an $89 target, citing reduced confidence on existing-plant data center deals, and management noted in-state data center demand plateaued without state tax incentives. Watch the next earnings print for whether any nuclear contract moves from prospective to signed; that is the development that would shift the thesis from rate-base compounding to rate-base plus contracted nuclear income.
Peer Cohorts (Per Segment, With Filing Citations)
PSEG Power & Other (reported)
- ES (EVERSOURCE ENERGY)
- (no filing in the citation store)
- EIX (EDISON INTERNATIONAL)
- (no filing in the citation store)
- NI (NISOURCE INC.)
- (no filing in the citation store)
- FE (FIRSTENERGY CORP)
- (no filing in the citation store)
- WEC (WEC ENERGY GROUP, INC.)
- (no filing in the citation store)
- CMS (CMS ENERGY CORP)
- (no filing in the citation store)
- AEP (AMERICAN ELECTRIC POWER CO INC.)
- (no filing in the citation store)
- OGE (OGE ENERGY CORP.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
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
Jefferies analyst note, 2026 · PSEG Q1 2026 earnings presentation · PSEG Q1 2026 earnings call · PSEG Q1 2026 earnings release · Jefferies analyst note and PSEG Q1 2026 earnings call, 2026