WEC Energy Group Inc (WEC)

Conclusion

WEC Energy Group is a Milwaukee-based regulated utility that generates, transmits and distributes electricity and distributes natural gas, mainly in Wisconsin and Illinois. At a price of 117.15 USD on 2026-11-09, the market capitalisation is 38.54 billion USD and the enterprise value is 61.66 billion USD.

The verdict is fair. The price-to-earnings ratio of 21.3x is close to its ten-year median of 21.5x, a premium of -1.2%, while EV/EBITDA of 14.4x stands above its median of 13.8x, a premium of 4.7%. The fair value band runs from 87.71 to 131.57 USD with a midpoint of 109.64 USD, giving a margin of safety of -6.4% at the current price, so the price already sits above the midpoint. The discounted cash flow value cannot be produced because trailing free cash flow is negative, and the growth implied by the price in a reverse DCF is not available. Delivered growth is modest: revenue grew at a 5-year compound rate of 6.2% and earnings per share at 4.6%.

What holds the case up is the operating margin of 24.8% against a ten-year median of 22.0%, eight earnings beats out of eight quarters, and a Piotroski score of 6 out of 9. What would break it is leverage: net debt to EBITDA of 5.4x and interest coverage of 2.96x. Cash generation is the other weak point, with trailing free cash flow conversion at -44.8%, and the current ratio of 0.53 adds to the strain.

Financial health

Financial strength is red, held down by four weak measures: net debt to EBITDA of 5.4x, interest coverage of 2.96x, a current ratio of 0.53 and an Altman Z-score of 1.14, which sits in the distress zone. The quick ratio is 0.28 and debt to equity is 1.59. The Altman model was designed for manufacturers, so its zone is only a rough guide for a utility. Insolvency risk: low, about 1.5% by the estimate of the Ohlson model over one to two years. The company's debt has grown only 3.1% a year over five years, which is less than the pace of its revenue growth. The company's heavy borrowing, typical for a utility funding its asset base, is the key point to monitor.

Earnings quality

Earnings quality is yellow. Free cash flow conversion is -44.8% on a trailing basis and -7.8% over five years, and trailing free cash flow after stock-based compensation is -811 million USD. The accrual ratio of -3.7% is a favourable sign. Stock-based compensation is not available, so its share of revenue cannot be shown. The share count has risen at a compound rate of 0.7% a year over five years, so there have been no net buybacks. The Piotroski score is 6 out of 9 and the Beneish M-score of -2.57 points to an unlikely risk of manipulation. The company beat earnings estimates in all eight of the last quarters, with an average surprise of 7.1%. Analyst estimates for the current year moved up 0.3% over 90 days, and for next year up 0.2%.

Profitability

Profitability is green. The operating margin is 24.8% against a ten-year median of 22.0%, and the net margin is 17.5% against a median of 15.4%. The gross margin of 51.9% sits well above its median of 36.1%. The operating margin stability value is 0.0857. Return on invested capital is 6.8% against a weighted average cost of capital of 7.3%, and the reported gap of -0.49% is neutral, so the business barely earns its cost of capital. Return on equity of 12.4% is flattered by leverage: the DuPont split shows a net margin of 15.9%, an asset turnover of 0.19 and an equity multiplier of 3.78.

Growth

Growth is yellow, with four neutral signals and none good. Revenue compounded at 0.7% over three years, 6.2% over five years and 5.2% over ten years. Earnings per share compounded at 2.2% over three years, 4.6% over five years and 7.3% over ten years. Revenue grew in six of the last ten comparable years. Analysts expect earnings per share to grow 7.2% next year. The recent three-year pace is therefore well below the longer-term record, which is the main reason growth does not earn a better colour.

Valuation

Valuation is yellow, based on one neutral signal from the verdict. Against ten-year medians, the price-to-earnings ratio is at a premium of -1.2%, EV/EBITDA at 4.7%, price-to-sales at 15.2% and price-to-book at 6.0%. The free cash flow yield is -2.1% and the earnings yield 4.7%. The discount rate is 8.9% and the terminal growth rate 2.5%, but the discounted cash flow value is not available because the starting free cash flow is negative. The reverse DCF implied growth is not available. The fair value band midpoint of 109.64 USD is the same as the fair value from historical multiples. The dividend yield is 3.2%, with a forward yield of 3.3%. The payout on free cash flow is not available.

Risks

The main risk is leverage. Net debt to EBITDA of 5.4x and interest coverage of 2.96x leave little room if borrowing costs rise or earnings fall, and the current ratio of 0.53 shows short-term obligations exceed liquid assets. Negative free cash flow means dividends and investment must be funded by debt or equity, which would raise leverage or dilute shareholders. Stock-based compensation is not available. This analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the contribution of each business line cannot be assessed. The fair value band rests on fixed assumptions and is not a price target.