PINNACLE WEST CAPITAL CORP (PNW): what the price requires
The current priced-in claim for PINNACLE WEST CAPITAL CORP (PNW) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/PNW
Headline
| Field | Value |
|---|---|
| Ticker | PNW |
| Company | PINNACLE WEST CAPITAL CORP |
| Current price | $108.79/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 today | 20.1% |
| Multiple paid | 26x operating income |
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 5.5% cost of capital with 4% terminal growth over a 5-year stage (computed at the 5.5% minimum rate; the CAPM rate 4.9% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~5.1 years; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -1.01σ |
| cohort percentile (of 70 peers) | 77 |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.85x | 5 | expensive |
| Earnings | 1.25x | 2 | expensive |
| Relative | 1.30x | 5 | expensive |
| Growth | 1.12x | 2 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 4.8%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | Reference only (OCF-based, capex excluded): OCF $1.6B |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $83.44 | 1.30x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.6x / 20.0x / 23.4x (bear / base = reference held flat / bull), EV/EBITDA 15.1x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $124.30 | 0.88x | yes | Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $58.26 | 1.87x | yes | BV/sh $57.10, ROE (TTM) 9.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $58.84 | 1.85x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $79.27 | 1.37x | yes | Rev $5.5B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.0x / 2.5x / 2.9x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $64.32 | 1.69x | yes | EPS $5.36, growth 2% (input: historical EPS growth), PEG=10.10 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $3.34 | 32.57x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.91B × (1−21%) / WACC 4.8% → EPV (no growth) (excluded from median) |
| Residual Income | Asset | $58.94 | 1.85x | yes | BV $57.10 + 5yr PV of (ROE (TTM) 9.4% − Kₑ 9.3%) × BV; BV grows 6.1%/yr |
| Graham Number | Asset | $82.99 | 1.31x | yes | √(22.5 × EPS $5.36 × BVPS $57.10) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $29.70 | 3.66x | yes | EBITDA $1.40B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $172.95 | 0.63x | yes | EPS $5.36 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $5.74 | 18.95x | yes | BV $57.10 × (ROIC 0.5% / WACC 4.8%) |
| P/Sales Sector | Relative | $110.22 | 0.99x | yes | Revenue $5.46B × sector P/S 2.5x |
| PEG Fair Value | Relative | $201.00 | 0.54x | yes | EPS $5.36 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $57.95 | 1.88x | yes | EPS $5.36 / 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 | $11.0b |
| Net debt / NOPAT (after-tax) | 12.91x |
| Net debt / operating income (pre-tax) | 10.20x |
| Interest coverage | 2.5x |
| Share count CAGR (dilution) | 2.2% |
| Burning cash | no |
Bullet Takeaways
- The balance sheet carries roughly $11 billion of net debt against trailing operating income near $1.14 billion, with interest coverage around 2.6 times. This is a capital-intensive regulated utility funding a large build, so the leverage is the business model, but it leaves little slack if the regulator denies recovery.
- At $102.35 the price sits below where most static valuation frames land. Asset-based, earnings-power, and peer-multiple methods all read the price as full to rich, while only the forward-growth method reaches it. The market is paying for durable rate base compounding rather than today's earnings.
- The whole case turns on the pending Arizona rate case. APS asked for a net base rate increase of $579.5 million, a 13.99% net increase, and the eight-week evidentiary hearing runs through mid-2026. The outcome sets the allowed return that every growth assumption rests on.
Bull Case
Start with the balance sheet, because for a regulated utility the balance sheet is the franchise. Pinnacle West runs about $11 billion of net debt against trailing operating income near $1.14 billion. That looks heavy in isolation, but it is the signature of a utility deep into a capital build: the company borrows to put steel in the ground, earns a regulated return on that steel, and recovers the cost through rates. Management's willingness to keep investing, with capital plans that carry the rate base higher each year, is the clearest signal it expects that recovery to come. The "growth pays for growth" structure the company describes, where large new customers sign long-term contracts to fund the incremental infrastructure they require, is designed to add load without diluting existing ratepayers or the return profile.
The demand backdrop is unusually favorable for a utility. The first quarter of 2026 showed retail sales up 9.4%, with commercial and industrial demand up 14.6%, driven by Phoenix-area population growth, semiconductor fabrication, and data center expansion. That is the kind of structural load growth most utilities can only wish for, and it is concentrated in a service territory APS effectively owns. The company swung to a first-quarter profit of $0.27 per share against an expected small loss, helped by higher transmission revenue, customer growth, and lower operations and maintenance cost. Management reaffirmed full-year 2026 guidance and a 5% to 7% long-term earnings growth target.
On valuation, the price is doing something specific. They are paying for the compounding the rate base is set up to deliver if the regulator cooperates. The 10-K is explicit that the load growth is real: APS describes a subscription model for large load customers as "part of the company's 'growth pays for growth' strategy where large load customers would enter into a long-term special contract to pay for the costs associated with the incremental infrastructure needed to provide service" (FY2025 10-K). If the pending rate case lands near the request, the earnings base steps up and the growth target becomes funded rather than hoped for.
Bear Case
The structural truth a holder would rather not face is the regulator. Pinnacle West does not set its own prices; the Arizona Corporation Commission does, and the entire bull case is a bet on a rate case that has not been decided. The company's own filing states the risk plainly: there is a chance "the ACC will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility" (FY2025 10-K). APS requested a 13.99% net increase (FY2025 10-K), and that request has drawn public opposition, with the state attorney general and consumer advocates pushing for a smaller increase and a lower allowed return. A disallowance is not a tail risk here; it is the live debate.
The leverage compounds the regulatory risk. With net debt near $11 billion and interest coverage around 2.6 times, the company has limited cushion. A higher-for-longer rate environment raises the cost of the next tranche of debt, and a stingy rate case would mean financing a large capital plan without the return needed to service it comfortably. The growth the bulls celebrate is the same growth that requires the spending; if the regulator funds the load growth at a lower allowed return than requested, the company carries the capital cost while the earnings uplift comes in light.
Then there is what the valuation work itself says. Most of the families, asset, earnings power, and peer multiples, sit below the current price. Only the forward-growth method reaches it, which means the price already assumes the rate base compounding plays out cleanly. That is a one-way bet dressed as a defensive utility. If the rate case disappoints, the support structure under the price thins to a single method, and a utility trading at the top of its peer multiple distribution has further to fall than one priced like an average regulated name.
Valuation
At $102.35 the price sits below where the bulk of the methods land. Asset-based approaches cluster in the high $50s to low $80s, earnings-power methods read lower still, and the peer-multiple frames are mixed, with the price-to-sales comparison landing near the quote while the enterprise-value-to-EBITDA comparison reads it as rich. The forward-growth methods are the only family that reaches the current price. The pattern is the signal: when the static frames say full and only the growth path reaches the quote, the buyer is underwriting durable compounding rather than current cash generation.
Inverting the price into the assumption it embeds, the market is paying a company-wide multiple near 26 times operating income. That multiple sits at the very top of the regulated-utility peer distribution, well beyond the upper quartile. Against the company's own history the implied near-term pace is within what it has delivered; the stretch is in how long that pace must persist, not the rate itself. So the priced-in bet reads as broadly consistent with plausible growth, but it leaves no margin for a weak rate case.
The dividend frames the floor. The quarterly payout of $0.91 per share, an annual $3.64 and a yield near 3.7%, is the cash return a holder collects while the rate case plays out. The 5% to 7% long-term earnings growth target, if funded by a constructive ACC decision, is what would carry total return above that yield. The honest read is that the price is reasonable only if the regulator delivers; the static methods are telling you there is little asset or earnings cushion beneath the growth story.
Catalysts
The dominant near-term catalyst is the 2025 APS rate case before the Arizona Corporation Commission. APS is seeking a net base rate increase of $579.5 million, a 13.99% net increase, and the evidentiary hearing before the administrative law judge began on May 18, 2026 and is expected to run about eight weeks. A final decision is still at least six months away as of mid-2026, so the verdict, and the allowed return on equity that comes with it, is the single event that will reset the earnings base. The proposal includes new large-load rate structures aimed at making data centers pay for the system growth they cause, with reporting describing a roughly 45% rate increase targeted at data center customers under the APS plan.
On results and guidance, the first quarter of 2026 swung to a profit of $0.27 per share, beating an expected small loss, with revenue of $1.15 billion against roughly $1.03 billion a year earlier, helped by hotter-than-normal weather, customer growth, higher transmission revenue, and lower operations and maintenance cost. Retail sales rose 9.4% with commercial and industrial demand up 14.6%. Management reaffirmed full-year 2026 EPS guidance of $4.55 to $4.75 and a 5% to 7% long-term growth target, supported by a multi-year capital plan.
Sentiment is neutral. The analyst consensus is a Hold, roughly 4 Buy, 12 Hold, and 1 Sell across about 17 analysts, with a median 12-month price target near $103 (June 27, 2026) to $105 and a range of about $83 to $124. One analyst recently raised a target by $4. The quarterly dividend is $0.91 per share. The data center demand wave is the structural tailwind that several analysts cite, but it only converts to earnings if the rate case funds the build at an adequate return.
Sources:
- https://www.stocktitan.net/sec-filings/PNW/8-k-pinnacle-west-capital-corp-reports-material-event-30a4cd571131.html
- https://www.aps.com/en/About/Our-Company/Newsroom/Articles/APS-Rate-Case-Hearing-Begins
- https://ktar.com/arizona-business/data-centers-aps-rate-hike/5812611/
- https://stockanalysis.com/stocks/pnw/forecast/
- https://stockanalysis.com/stocks/pnw/dividend/
Peer Cohorts (Per Segment, With Filing Citations)
Regulated Electricity (single reportable segment, APS) (reported)
- NEE (NextEra Energy Inc)
- (no filing in the citation store)
- DUK (DUKE ENERGY CORPORATION)
- (no filing in the citation store)
- SO (SOUTHERN CO)
- (no filing in the citation store)
- AEP (AMERICAN ELECTRIC POWER CO INC.)
- (no filing in the citation store)
- D (DOMINION ENERGY, INC)
- (no filing in the citation store)
- EXC (EXELON CORPORATION)
- (no filing in the citation store)
- XEL (XCEL ENERGY INC)
- (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.