NI: Hold
Published 17 Sep 2026, 15:43 BST. This is the frozen version, not the current recommendation.
Why this assessment was issued
Stored financial statements changed; the revised figures need checking. A new earnings release is available. The model version changed. Required data is available again; reconsider the suspended assessment. The published model version has been replaced. Record the new calculation basis even if the rating is unchanged. Neither a positive nor a negative classification meets the stated requirements. Review cash generation, borrowing, business evidence.
Neither a positive nor a negative classification meets the stated requirements. Review cash generation, borrowing, business evidence.
Supporting evidence
The stock is leading its sector
Over one year, the stock changed +1.0% against -50.4% for Utilities (XLU). The gap is +51.4 percentage points. These are price returns, before dividends.
Quarterly sales are growing
Revenue changed +3.4% from the same quarter last year, through 2026-06-30. The previous quarter’s year-on-year change was +8.0%.
Opposing evidence
Capital spending changes the cash picture
Operating cash covers 2.54 times profit, but cash after capital spending covers -1.20 times. Cash generation is stronger before the investment bill is paid.
The profit margin narrowed
The latest quarterly operating margin was 17.7%, -3.4 percentage points from a year earlier. Compare the sales and margin contributions below.
The original scenarios
| Scenario | Sales growth | Profit margin | Model value |
|---|---|---|---|
| Weaker | -30.7% | 9.9% | $28.27 |
| Central | 13.3% | 11.0% | $64.95 |
| Stronger | 57.3% | 12.1% | $119.39 |
Method: Earnings and historical valuation. A sufficiently complete, positive earnings record allows the stock's own P/E history to be used. These scenarios are not probability intervals.
Original assumptions and checks
| eps | 1.92 |
|---|---|
| cash | 70000000.0 |
| debt | 17565600000.0 |
| years | 1.2101300479123889 |
| growth | 13.296855171966616 |
| margin | 7.957062981327144 |
| profit | 905100000.0 |
| cash_ok | False |
| debt_ok | False |
| growths | [18.554631488385432, 323.64096901993895, 8.0390788555478, 3.449659045326925] |
| revenue | 11374800000.0 |
| downside | 31.7371211030128 |
| leverage | 5.584117966231528 |
| multiple | 21.067039106145252 |
| free_cash | -1086200000.0 |
| buy_hurdle | 20 |
| volatility | 18.929183497557013 |
| history_end | 2026-09-11 |
| reward_risk | 1.7907874906208587 |
| annual_years | 5 |
| usable_weeks | 157 |
| history_start | 2023-09-15 |
| history_weeks | 157 |
| financial_date | 2026-06-30 |
| interest_cover | 2.4545454545454546 |
| operating_cash | 2303200000.0 |
| uncapped_growth | 13.296855171966616 |
| current_multiple | 21.567708333333332 |
| projected_margin | 10.984595687506006 |
| historical_margin | 14.01212839368487 |
Recent price · Passed. Weekly close dated 2026-09-11.
Suitable business model · Passed. Capital spending and funding matter. Use operating cash flow with explicit reinvestment; this does not replace a regulated rate-base review.
Four quarters · Passed. Four quarters ending 2026-06-30.
Current financials · Passed. Statements through 2026-06-30; factor prices dated 2026-09-11.
Annual record · Passed. 5 consecutive annual profit margins, including loss years.
Comparable earnings history · Passed. P/E is usable in 157 of 157 weeks. At least 52 usable weeks and 70% coverage are required; excluding too many loss or missing weeks would bias the target.
Earnings and price dates · Passed. Earnings-release EPS $1.92, for four quarters ending 2026-06-30.
Price risk · Passed. Risk uses the latest 52 weekly price changes.
Comparable sales growth · Passed. Growth uses the median of four quarterly year-on-year comparisons.
Positive statement earnings · Passed. Trailing statement profit is positive.
Earnings reconciliation · Passed. Release EPS is $1.92; statement-derived EPS is $1.89. The difference is within the 5% review threshold; this does not prove there are no unusual items.
Statement totals · Passed. The latest four quarters agree with the trailing snapshot within 5%.
Cash and borrowing · Passed. Cash generation, debt and interest-cover figures are available.
Target publication review · Passed. The model estimate is within SM's automatic publication range of one quarter to four times the current price. This is a review threshold, not evidence that the market price is correct.
Policy sm-review-2-research · Model sm-assessment-14-operating-capital · Data 18c11c60a9b5.