10 Best Undervalued Utilities Stocks for February 2026
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Market Overview & Selection Criteria
The utilities sector offers stability amid market volatility, with many companies showing strong intrinsic value potential based on ValueSense analysis. These top utilities stock picks were selected using ValueSense's proprietary methodology, focusing on undervalued stocks where intrinsic value significantly exceeds current market pricing, combined with quality ratings above 5.5, positive revenue growth where applicable, and robust metrics like ROIC, FCF margins, and gross margins. Criteria emphasize fundamental strength in the utilities space, including market cap over $27B, highlighting opportunities for best value stocks in energy distribution and generation. This watchlist draws from curated ValueSense data to spotlight investment opportunities for retail investors seeking defensive positions with growth potential.
Featured Stock Analysis
Stock #1: Duke Energy Corporation (DUK)
| Metric | Value |
|---|---|
| Market Cap | $93.8B |
| Quality Rating | 6.6 |
| Intrinsic Value | $188.7 |
| 1Y Return | 9.1% |
| Revenue | $31.7B |
| Free Cash Flow | $8,960.0M |
| Revenue Growth | 4.8% |
| FCF margin | 28.3% |
| Gross margin | 69.9% |
| ROIC | 5.2% |
| Total Debt to Equity | 19.7% |
Investment Thesis
Duke Energy Corporation (DUK) stands out in the utilities sector with a Quality rating of 6.6 and an intrinsic value of $188.7, suggesting substantial undervaluation for value-focused analysis. The company reports a Market Cap of $93.8B, Revenue of $31.7B, and strong Free Cash Flow of $8,960.0M, supported by a healthy FCF margin of 28.3% and Gross margin of 69.9%. With Revenue growth at 4.8% and ROIC of 5.2%, alongside a manageable Total Debt to Equity of 19.7%, DUK demonstrates resilient financial health suitable for long-term portfolio consideration. Its 1Y Return of 9.1% reflects steady performance in a stable sector.
This analysis highlights DUK's capacity to generate consistent cash flows, making it a core holding in utilities stock picks for investors examining DUK analysis through intrinsic value lenses.
Key Catalysts
- Strong FCF generation at $8,960.0M supports dividends and reinvestment.
- High gross margin of 69.9% indicates operational efficiency.
- Quality rating of 6.6 signals reliable fundamentals.
- Steady revenue growth of 4.8% in a defensive sector.
Risk Factors
- Moderate ROIC of 5.2% may limit aggressive expansion.
- Sector sensitivity to regulatory changes in energy pricing.
- 1Y Return of 9.1% trails some peers in growth.
Stock #2: National Grid plc (NGG)
| Metric | Value |
|---|---|
| Market Cap | $83.5B |
| Quality Rating | 6.1 |
| Intrinsic Value | $158.2 |
| 1Y Return | 38.1% |
| Revenue | £36.8B |
| Free Cash Flow | (£2,406.0M) |
| Revenue Growth | (11.6%) |
| FCF margin | (6.5%) |
| Gross margin | 78.8% |
| ROIC | 8.4% |
| Total Debt to Equity | 123.4% |
Investment Thesis
National Grid plc (NGG) features a Quality rating of 6.1 and intrinsic value of $158.2, positioning it as an undervalued utility play with a Market Cap of $83.5B. Despite Revenue growth of 11.6% and negative Free Cash Flow of £2,406.0M with FCF margin at 6.5%, the company boasts a high Gross margin of 78.8% and ROIC of 8.4%. Revenue stands at £36.8B, and Total Debt to Equity is 123.4%, reflecting capital-intensive operations common in transmission. The impressive 1Y Return of 38.1% underscores market recognition of its infrastructure strengths.
NGG's profile suits stock watchlist inclusion for those analyzing international utilities exposure in NGG analysis.
Key Catalysts
- Exceptional 1Y Return of 38.1% shows momentum.
- Leading gross margin of 78.8% for cost control.
- Solid ROIC of 8.4% indicates efficient capital use.
- Intrinsic value of $158.2 points to upside potential.
Risk Factors
- Negative FCF and revenue growth signal cash flow pressures.
- High Total Debt to Equity at 123.4% increases leverage risk.
- Currency exposure from £-denominated metrics.
Stock #3: American Electric Power Company, Inc. (AEP)
| Metric | Value |
|---|---|
| Market Cap | $63.4B |
| Quality Rating | 6.3 |
| Intrinsic Value | $180.3 |
| 1Y Return | 23.3% |
| Revenue | $21.4B |
| Free Cash Flow | $2,165.5M |
| Revenue Growth | 9.3% |
| FCF margin | 10.1% |
| Gross margin | 44.4% |
| ROIC | 6.1% |
| Total Debt to Equity | 8.7% |
Investment Thesis
American Electric Power Company, Inc. (AEP) earns a Quality rating of 6.3 with intrinsic value at $180.3, backed by Market Cap of $63.4B and Revenue of $21.4B. Positive Free Cash Flow of $2,165.5M yields a FCF margin of 10.1%, complemented by Revenue growth of 9.3%, Gross margin of 44.4%, and ROIC of 6.1%. Low Total Debt to Equity of 8.7% enhances balance sheet strength, with 1Y Return at 23.3% reflecting solid performance.
This makes AEP a balanced pick in undervalued utilities stocks for AEP analysis.
Key Catalysts
- Revenue growth of 9.3% drives expansion.
- Positive FCF margin of 10.1% supports stability.
- Low debt ratio of 8.7% minimizes financial risk.
- Strong 1Y Return of 23.3%.
Risk Factors
- Lower gross margin of 44.4% vs. peers.
- ROIC at 6.1% suggests moderate returns on capital.
- Regulatory hurdles in power generation.
Stock #4: Exelon Corporation (EXC)
| Metric | Value |
|---|---|
| Market Cap | $44.8B |
| Quality Rating | 5.5 |
| Intrinsic Value | $71.0 |
| 1Y Return | 12.9% |
| Revenue | $24.3B |
| Free Cash Flow | ($1,595.0M) |
| Revenue Growth | 6.1% |
| FCF margin | (6.6%) |
| Gross margin | 42.5% |
| ROIC | 9.6% |
| Total Debt to Equity | 176.2% |
Investment Thesis
Exelon Corporation (EXC) has a Quality rating of 5.5 and intrinsic value of $71.0, with Market Cap $44.8B and Revenue $24.3B. It shows Revenue growth of 6.1% but negative Free Cash Flow of $1,595.0M and FCF margin 6.6%. Gross margin is 42.5%, ROIC 9.6%, and Total Debt to Equity 176.2%, with 1Y Return 12.9%. High ROIC offsets cash challenges in nuclear-focused operations.
Ideal for EXC analysis in value-oriented stock picks.
Key Catalysts
- High ROIC of 9.6% for capital efficiency.
- Steady revenue growth at 6.1%.
- Large-scale revenue base of $24.3B.
- Intrinsic value suggests re-rating potential.
Risk Factors
- Negative FCF pressures operational cash.
- Elevated debt at 176.2%.
- Lowest quality rating at 5.5.
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Stock #5: Consolidated Edison, Inc. (ED)
| Metric | Value |
|---|---|
| Market Cap | $38.1B |
| Quality Rating | 6.2 |
| Intrinsic Value | $112.9 |
| 1Y Return | 14.6% |
| Revenue | $16.6B |
| Free Cash Flow | $3,392.0M |
| Revenue Growth | 10.3% |
| FCF margin | 20.4% |
| Gross margin | 62.3% |
| ROIC | 8.7% |
| Total Debt to Equity | (64.4%) |
Investment Thesis
Consolidated Edison, Inc. (ED) scores a Quality rating of 6.2 with intrinsic value $112.9, Market Cap $38.1B, and Revenue $16.6B. Strong Free Cash Flow $3,392.0M drives FCF margin 20.4%, with Revenue growth 10.3%, Gross margin 62.3%, ROIC 8.7%, and Total Debt to Equity 64.4%. 1Y Return 14.6% supports its regulated utility model.
Key for ED analysis in diversified utilities watchlist.
Key Catalysts
- Robust FCF margin of 20.4%.
- Revenue growth leading at 10.3%.
- High ROIC of 8.7%.
- Negative debt ratio indicates equity strength.
Risk Factors
- Regional concentration risks.
- Moderate 1Y Return of 14.6%.
- Dependence on rate regulation.
Stock #6: WEC Energy Group, Inc. (WEC)
| Metric | Value |
|---|---|
| Market Cap | $35.5B |
| Quality Rating | 6.1 |
| Intrinsic Value | $125.6 |
| 1Y Return | 12.3% |
| Revenue | $9,547.2M |
| Free Cash Flow | ($404.9M) |
| Revenue Growth | 11.9% |
| FCF margin | (4.2%) |
| Gross margin | 49.5% |
| ROIC | 5.3% |
| Total Debt to Equity | 9.0% |
Investment Thesis
WEC Energy Group, Inc. (WEC) holds a Quality rating 6.1, intrinsic value $125.6, Market Cap $35.5B, Revenue $9,547.2M. Revenue growth 11.9% contrasts negative Free Cash Flow $404.9M and FCF margin 4.2%, with Gross margin 49.5%, ROIC 5.3%, Total Debt to Equity 9.0%, and 1Y Return 12.3%.
Fits WEC analysis for growth in utilities.
Key Catalysts
- Top revenue growth of 11.9%.
- Low debt at 9.0%.
- Solid quality rating.
- Intrinsic upside to $125.6.
Risk Factors
- Negative FCF challenges.
- Lower ROIC of 5.3%.
- Smaller revenue scale.
Stock #7: NRG Energy, Inc. (NRG)
| Metric | Value |
|---|---|
| Market Cap | $29.7B |
| Quality Rating | 6.1 |
| Intrinsic Value | $211.2 |
| 1Y Return | 46.0% |
| Revenue | $29.8B |
| Free Cash Flow | $1,705.0M |
| Revenue Growth | 6.0% |
| FCF margin | 5.7% |
| Gross margin | 17.1% |
| ROIC | 44.6% |
| Total Debt to Equity | (55.9%) |
Investment Thesis
NRG Energy, Inc. (NRG) rates 6.1 quality, intrinsic value $211.2, Market Cap $29.7B, Revenue $29.8B. Free Cash Flow $1,705.0M gives FCF margin 5.7%, Revenue growth 6.0%, Gross margin 17.1%, standout ROIC 44.6%, Total Debt to Equity 55.9%, 1Y Return 46.0%.
Standout for NRG analysis with high returns.
Key Catalysts
- Best 1Y Return at 46.0%.
- Exceptional ROIC 44.6%.
- Positive FCF support.
- Large revenue base.
Risk Factors
- Low gross margin 17.1%.
- Competitive energy markets.
- Volatility in generation.
Stock #8: DTE Energy Company JR SUB DB 2017 E (DTW)
| Metric | Value |
|---|---|
| Market Cap | $27.6B |
| Quality Rating | 6.1 |
| Intrinsic Value | $27.1 |
| 1Y Return | -1.1% |
| Revenue | $14.8B |
| Free Cash Flow | $2,135.0M |
| Revenue Growth | 20.6% |
| FCF margin | 14.4% |
| Gross margin | 88.6% |
| ROIC | 10.8% |
| Total Debt to Equity | (2.0%) |
Investment Thesis
DTE Energy Company JR SUB DB 2017 E (DTW) has Quality rating 6.1, intrinsic value $27.1, Market Cap $27.6B, Revenue $14.8B. Free Cash Flow $2,135.0M, Revenue growth 20.6%, FCF margin 14.4%, Gross margin 88.6%, ROIC 10.8%, Total Debt to Equity 2.0%, 1Y Return -1.1%.
Niche for DTW analysis in fixed income-like utilities.
Key Catalysts
- Highest revenue growth 20.6%.
- Top gross margin 88.6%.
- Strong ROIC 10.8%.
- Minimal debt exposure.
Risk Factors
- Negative 1Y Return -1.1%.
- Subordinated debt structure.
- Limited liquidity potential.
Stock #9: DTE Energy Company (DTE)
| Metric | Value |
|---|---|
| Market Cap | $27.6B |
| Quality Rating | 6.5 |
| Intrinsic Value | $152.7 |
| 1Y Return | 12.6% |
| Revenue | $14.9B |
| Free Cash Flow | $5,339.0M |
| Revenue Growth | 20.5% |
| FCF margin | 35.9% |
| Gross margin | 88.1% |
| ROIC | 11.6% |
| Total Debt to Equity | (2.0%) |
Investment Thesis
DTE Energy Company (DTE) achieves Quality rating 6.5, intrinsic value $152.7, Market Cap $27.6B, Revenue $14.9B. Exceptional Free Cash Flow $5,339.0M, FCF margin 35.9%, Revenue growth 20.5%, Gross margin 88.1%, ROIC 11.6%, Total Debt to Equity 2.0%, 1Y Return 12.6%.
Prime DTE analysis pick with top metrics.
Key Catalysts
- Highest FCF margin 35.9%.
- Near-top revenue growth 20.5%.
- Leading ROIC 11.6%.
- High quality rating 6.5.
Risk Factors
- Shared risks with DTW instrument.
- Regional energy demand fluctuations.
- High gross margin dependency.
Stock #10: FirstEnergy Corp. (FE)
| Metric | Value |
|---|---|
| Market Cap | $27.2B |
| Quality Rating | 6.6 |
| Intrinsic Value | $56.2 |
| 1Y Return | 20.5% |
| Revenue | $14.5B |
| Free Cash Flow | $3,532.0M |
| Revenue Growth | 7.6% |
| FCF margin | 24.4% |
| Gross margin | 65.4% |
| ROIC | 9.3% |
| Total Debt to Equity | 191.6% |
Investment Thesis
FirstEnergy Corp. (FE) scores Quality rating 6.6, intrinsic value $56.2, Market Cap $27.2B, Revenue $14.5B. Free Cash Flow $3,532.0M, Revenue growth 7.6%, FCF margin 24.4%, Gross margin 65.4%, ROIC 9.3%, Total Debt to Equity 191.6%, 1Y Return 20.5%.
Strong closer for FE analysis in utilities stock picks.
Key Catalysts
- Tied-top quality 6.6.
- High FCF margin 24.4%.
- Solid 1Y Return 20.5%.
- Good ROIC 9.3%.
Risk Factors
- Highest debt 191.6%.
- Past regulatory scrutiny.
- Moderate growth 7.6%.
Portfolio Diversification Insights
These 10 best utilities stocks provide sector allocation focused on electric power generation and transmission, with leaders like DUK $93.8B and NGG $83.5B anchoring large-cap stability, mid-caps like AEP and ED adding growth (e.g., 9.3%-11.9% revenue), and high-ROIC plays like NRG 44.6% and DTE 11.6% for upside. Cross-references show synergy: pair low-debt AEP/ED with high-return NRG/NGG for balance; DTE/DTW offer paired exposure. Overall, 100% utilities diversification reduces volatility, with average quality ~6.2, blending FCF-positive (DUK, DTE) and growth leaders (DTW, DTE) for resilient stock watchlist construction.
Market Timing & Entry Strategies
Consider positions during energy sector dips, such as post-earnings or rate cut cycles, targeting entries when prices approach 80-90% below intrinsic value (e.g., NRG at $211.2, DUK at $188.7). Use dollar-cost averaging for 3-6 month horizons, monitoring ROIC >8% and FCF trends. Scale in on revenue growth >7% like DTE 20.5%, avoiding high-debt peaks (e.g., FE 191.6%). Track ValueSense signals for optimal market timing in these undervalued stocks.
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FAQ Section
How were these stocks selected?
These top 10 utilities stock picks were chosen via ValueSense criteria: quality ratings ≥5.5, high intrinsic value upside, strong ROIC/FCF margins, and utilities focus for best value stocks.
What's the best stock from this list?
NRG leads with 46.0% 1Y Return, 44.6% ROIC, and $211.2 intrinsic value, though DTE excels in FCF (35.9% margin) for NRG analysis or DTE analysis preferences.
Should I buy all these stocks or diversify?
Diversify across large-caps (DUK, NGG) and growth (DTE, DTW) for balance; full allocation suits pure utilities play, but blend with other sectors per risk tolerance.
What are the biggest risks with these picks?
Key concerns include high debt (FE 191.6%, EXC 176.2%), negative FCF (NGG, WEC), and regulatory/interest rate sensitivity common in utilities.
When is the best time to invest in these stocks?
Optimal during sector pullbacks or favorable macro (e.g., lower rates boosting debt-heavy names); monitor intrinsic value gaps and earnings for investment opportunities.