Edison International (EIX)

Conclusion

Edison International is a regulated electric utility. Through its subsidiaries, it generates and distributes power across an area of about 50,000 square miles in southern, central and coastal California, and is headquartered in Rosemead. At 60.14 USD on 9 November 2026, the market capitalisation is 23.1 billion USD and the enterprise value is 65.7 billion USD.

The verdict is undervalued. Today's P/E of 6.3 sits against a ten-year median of 18.4, EV/EBITDA of 8.9 against 11.0, price-to-sales of 1.2 against 1.5, and price-to-book of 1.3 against 1.6. The fair value band runs from 70.43 to 105.64 USD, with a midpoint of 88.04 USD and a margin of safety of 46.4%. This band is an order of magnitude built on fixed assumptions, not a price target. The DCF uses an 8.9% discount rate and 2.5% terminal growth, but its per-share value is not available because free cash flow is negative. The growth implied by the price (reverse DCF) is also not available. For comparison, revenue has compounded at 7.3% over five years and EPS at 38.4%.

The strongest numbers are the operating margin of 21.8%, a Piotroski score of 7 out of 9, and a Beneish M-score of -2.58, which is read as unlikely manipulation. The weakest are net debt to EBITDA of 5.78x, interest coverage of 2.21x and free cash flow conversion of -3.6% over the trailing twelve months. Return on invested capital of 5.18% is also only just below the WACC of 5.59%. Leverage and cash generation would break the valuation case if they do not improve.

Financial health

Financial strength is red, held back by all four of its weak signals. The current ratio is 0.77 and the quick ratio is 0.39, so short-term liabilities exceed liquid assets. Net debt to EBITDA is 5.78x and debt to equity is 2.39. Interest coverage is 2.21x on a trailing basis. The Altman Z-score is 0.65, placing the company in the distress zone, though the model was designed for manufacturers rather than a regulated utility. Insolvency risk is low, about 1.2% by the estimate of the Ohlson model over one to two years. The Ohlson estimate is a model output and should not be read as a forecast of default.

Earnings quality

Earnings quality is yellow. The Piotroski score of 7 out of 9 and the Beneish M-score of -2.58, read as unlikely manipulation, support the rating. Free cash flow conversion is -3.6% on a trailing basis and -124.3% on a five-year average, and free cash flow after stock-based compensation is -132 million USD. The accrual ratio is -1.4%, which is favourable. Stock-based compensation is not available. The share count has risen at a 0.6% compound rate over five years, so there have been no net buybacks. Over the last eight quarters the company beat estimates seven times, with an average surprise of 13.8%. Current-year estimates were revised down 0.2% over 90 days, and next-year estimates were revised up 0.1%.

Profitability

Profitability is green. The operating margin of 21.8% is well above its ten-year median of 13.1%, and the net margin of 19.8% is above its median of 7.5%. The gross margin of 37.3% is close to its median of 37.7%. Operating margin stability is 0.72. Return on invested capital is 5.18% against a WACC of 5.59%, a roic-minus-WACC of -0.4%, which is neutral and means the company is not yet earning above its cost of capital. Return on equity is 20.6%, but the DuPont split shows that leverage does much of the work: a net margin of 23.6%, an asset turnover of 0.21 and an equity multiplier of 5.35x.

Growth

Growth is green. Revenue has grown at a compound rate of 3.9% over three years, 7.3% over five years and 5.3% over ten years. Revenue grew in eight of ten comparable years. EPS compounded at 76.5% over three years, 38.4% over five and 13.1% over ten, so the recent earnings rise is much faster than revenue growth. The forecast for next year's EPS growth is 6.4%, which is well below the recent pace.

Valuation

Valuation is green. The P/E of 6.3 is 65.9% below its ten-year median of 18.4. EV/EBITDA of 8.9 is 18.8% below its median of 11.0, price-to-sales of 1.2 is 18.9% below its median of 1.5, and price-to-book of 1.3 is 21.4% below its median of 1.6. The fair value from historical multiples is 88.04 USD. The DCF uses a discount rate of 8.9% and terminal growth of 2.5%, but it gives no per-share value because the base free cash flow is negative. The reverse DCF implied growth is not available. The dividend yield is 5.7% and the forward yield is 5.9%. Payout on free cash flow is not available because free cash flow is negative.

Risks

Leverage is the main risk. Net debt to EBITDA of 5.78x and interest coverage of 2.21x leave little room if borrowing costs rise or earnings fall. The current ratio of 0.77 and the quick ratio of 0.39 mean the company depends on continuous access to funding. Negative free cash flow means the dividend, which yields 5.7%, is not covered by cash generation, and the fair value band depends on earnings returning to historical multiples. Return on invested capital of 5.18% against a WACC of 5.59% shows that growth does not yet create value on a cost-of-capital basis. Not available: stock-based compensation, the DCF per-share value, the reverse DCF, the debt maturity schedule and revenue by segment. This analysis is built only on the figures above and cannot test the regulatory outcomes that drive a utility's earnings.