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National Grid’s stock has delivered an 84.4% total return over the last five years. Current checks suggest the shares now sit close to their intrinsic value on a Dividend Discount Model (DDM), while market multiples still lean supportive. This creates a valuation debate rather than a clear-cut bargain or obvious premium.
An 84.4% return over five years points to a stock that has already rewarded patient holders, so fresh buyers need to think carefully about how much upside may reasonably be left from here.
The planned US$1.75b investment in Joulent and related AI data center power infrastructure can support long term cash flow potential, but the size of the capital commitment may weigh on how investors assess risk and required returns.
With a 4 out of 6 valuation score, National Grid presents a mixed picture rather than a clear bargain or clear overvaluation on the broader set of valuation checks.
The issue now is whether National Grid’s current share price is offering a reasonable entry for long term holders or whether the recent gains have already priced in most of the value suggested by the intrinsic value estimate and market multiples.
Find out why National Grid’s 23.6% return over the last year is lagging behind its peers.
Is National Grid Fairly Priced on Dividends?
The Dividend Discount Model for National Grid looks at what you are paying today for a stream of future dividends, given how much profit the company earns on equity and how much it retains. On the current inputs, the model assumes dividend growth of about 3.4% a year, supported by a return on equity of roughly 7.9% and a payout ratio near 53% of earnings.
Putting those pieces together gives an estimated intrinsic value of about £12.79 per share, which is only around 2.7% above the current share price, so the stock screens as very close to fully priced on this method. The recent US$1.75b commitment to Joulent helps explain why investors are focused on how future cash flows and dividends will be balanced against a heavier investment program, even if the model still points to only a small gap between price and value.
On this Dividend Discount Model view, National Grid looks about fairly valued, with the market already pricing in most of the projected dividend stream.
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.
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NG. Discounted Cash Flow as at Jul 2026
Is National Grid Still Cheap on Earnings?
The P/E ratio suits National Grid because earnings are a key anchor for regulated utilities where profits are shaped by allowed returns. Right now, National Grid trades on about 19.1x earnings, slightly below the Integrated Utilities industry average of roughly 19.2x and below the peer group average of about 22.7x.
On the fair P/E estimate of 21.8x, which reflects the kind of multiple investors might usually pay for a company with National Grid’s profile, the stock screens at a discount to that level. That points to a gap between what the market is currently paying and what might be implied by the company’s earnings, margins and risk mix.
On this P/E measure, National Grid stock appears undervalued relative to both its tailored fair multiple and wider peers.
LSE:NG. P/E Ratio as at Jul 2026
See what the numbers say about this price — find out in our valuation breakdown.
The National Grid Narrative: What Would Justify Today’s Price?
Simply Wall St Narratives for National Grid pick up where this valuation puzzle leaves off by spelling out which paths for growth, margins and earnings would need to play out for the stock to be worth materially more or less than today’s price. Rather than focusing on a single multiple or model output, each narrative sets out the assumptions behind its fair value estimate so you can compare them with National Grid’s actual results as they are reported. These sit on Simply Wall St’s Community page.
Be one of the first voices in the Simply Wall St community to set out a clear, number driven narrative on National Grid, including a view on whether the US$1.75b Joulent investment and related AI data center power projects ultimately earn their place in the company’s cash flow story. Share your assumptions, track how they hold up as new projects like Smart Path Connect and Bramford progress, and see how your thesis compares with other investors watching National Grid’s stock.
Do you think there’s more to the story for National Grid? Head over to our Community to see what others are saying!
The Bottom Line
For National Grid, the Dividend Discount Model (DDM) points to an intrinsic value only slightly above the current price, while the market multiple work suggests the stock still screens as undervalued against peers and its tailored P/E. That split largely comes down to how you weigh the capital intensity and funding needs behind projects like the US$1.75b Joulent commitment, compared with what investors are willing to pay for its earnings stream. The core question now is whether National Grid can convert this heavier investment phase into cash flows that justify a stronger earnings multiple without putting sustained pressure on dividends.
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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