Ever wondered if National Grid is actually good value for your portfolio, or if you might be missing out on a hidden opportunity? You are not alone, especially with all the chatter around its share price lately.
After a steady period, National Grid shares have climbed 0.7% over the past week and are now up an eye-catching 19.4% year-to-date. That sort of momentum often sparks fresh debates about growth potential and risk.
This renewed interest is backed by recent headlines. Sector-wide shifts in UK utility regulation and debates about energy infrastructure investments have all helped to keep National Grid in the spotlight. Even speculation about future policy changes has added a twist to the company’s market sentiment this year.
On the valuation front, National Grid currently has a 3 out of 6 valuation score, meaning it passes half of the simple undervalued checks we look for. Before you decide whether that score tells the full valuation story, let’s break down how value is assessed and explore a smarter way to look at a stock’s true worth by the end of this article.
Find out why National Grid’s 20.6% return over the last year is lagging behind its peers.
The Dividend Discount Model (DDM) is a valuation method that estimates a company’s intrinsic value based on projected future dividends, assuming those dividends continue to grow at a sustainable rate. This model is most useful for companies like National Grid, which have a stable dividend history and predictable payout patterns.
For National Grid, the recent dividend per share is £0.50, with a payout ratio of 52.7%. Analysts expect dividends to grow at a capped rate of 2.99%, slightly below the company’s average growth of 3.8% and overall expectations of 3.8%. Return on equity stands at a solid 8.03%, supporting both the current payout and potential for long-term increases.
Applying the DDM, National Grid’s estimated intrinsic value is £12.16 per share. This is about 5.8% higher than its current price. This suggests the market price reflects the company’s ability to deliver reliable and growing dividends, with a modest undervaluation according to this approach.
Result: ABOUT RIGHT
National Grid is fairly valued according to our Dividend Discount Model (DDM), but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
NG. Discounted Cash Flow as at Nov 2025
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for National Grid.
The Price-to-Earnings (PE) ratio is a widely used metric for valuing established, profitable companies like National Grid that generate consistent earnings. It summarizes how much investors are willing to pay for each pound of current earnings and offers a practical snapshot of market expectations.
In assessing what a “normal” or “fair” PE ratio should be, one must consider the company’s earnings growth prospects and risk profile. Higher growth typically justifies a higher PE, while elevated risks or uncertain outlooks may warrant a more conservative multiple.
National Grid is currently trading at a PE ratio of 19.8x. To put this in context, the industry average for the Integrated Utilities sector is 18.4x, and the average among its peers stands at 21.6x. This places National Grid in the middle of its competitive set, suggesting the market views its earnings potential as roughly average for its sector.
Simply Wall St’s proprietary Fair Ratio for National Grid is 21.6x. Unlike simple comparisons to peers or the general industry, the Fair Ratio includes key factors unique to National Grid, such as its earnings growth, margins, scale, and risk characteristics. This provides a more tailored and relevant benchmark, helping investors understand what the stock could trade at in today’s market.
Given that National Grid’s actual PE ratio is only slightly below the Fair Ratio, the stock appears fairly valued on this measure.
Result: ABOUT RIGHT
LSE:NG. PE Ratio as at Nov 2025
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Earlier, we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, personalized story you create that explains why you believe a company like National Grid is worth a particular value based on your own forecasts for its future revenue, earnings, and margins. Narratives connect the company’s story, such as its planned investments, regulatory environment, and industry changes, to a financial forecast and, ultimately, a fair value estimation.
Narratives are an easy and accessible tool available within the Community page on Simply Wall St, used by millions of investors. They help you decide whether to buy or sell by directly comparing your estimated Fair Value to the current share price, turning complex analysis into a clear action step. Narratives dynamically update as new information, such as news or earnings announcements, arrives, keeping your investment thesis current without extra work. For example, National Grid’s Narratives recently ranged from optimistic forecasts built on robust revenue growth and network upgrades (leading to higher fair values), to more cautious views concerned about regulatory risk or rising costs (resulting in lower fair values). Whichever perspective you take, Narratives empower you to back your decisions with both insight and data.
Do you think there’s more to the story for National Grid? Head over to our Community to see what others are saying!
LSE:NG. Community Fair Values as at Nov 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include NG.L.
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