Key Takeaways:
- Operational Beat: Endesa (ELE) is firing on all cylinders, with 9-month EBITDA rising 9% to €4.2 billion and Funds From Operations (FFO) surging 29% to €3.4 billion.
- Price Projection: Following a massive run-up, our model suggests the stock could actually pull back to €30 per share by December 2027.
- Expected Returns: This target implies a worrying -1.2% annualized return, signaling that the stock is currently priced for perfection.
- Regulatory Headwinds: While cash flow is strong, management warned that the current distribution remuneration framework “clearly does not provide adequate support” for necessary grid investments.
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Endesa (ELE) has been a star performer for dividend investors over the last year.
The stock has rallied roughly 50% over the past 12 months, driven by robust earnings and shareholder-friendly capital allocation.
In the first nine months of 2025, the company reported a 22% jump in net income (excluding extraordinary items), helped significantly by the removal of the 1.2% extraordinary regulatory levy, which boosted results by around €200 million.
To sweeten the deal, Endesa is actively buying back stock, launching a €500 million share buyback program, and expanding its customer base through a strategic deal with MasOrange that added potential access to 1 million clients.
But at €31 per share, investors need to ask: Has the easy money already been made?
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What the Model Says for ELE Stock
We evaluated Endesa’s potential through 2027, weighing its strong cash generation against regulatory risks and a stretched valuation.
Our model suggests the stock is overextended. Using a forecast of 0.9% Revenue Growth (CAGR) and 14.4% Operating Margins, the model projects the stock will drift down to €30 by the end of 2027.
This implies a -1.2% annualized return over the next two years.
While the dividend yield provides some cushion, capital depreciation could wipe out those income gains, making the stock effectively “dead money” at these levels.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ELE stock:
1. Revenue Growth: 0.9%
While the company is successfully pivoting to renewables (achieving 79% emission-free output), grid constraints are a major bottleneck. Management revealed that grid availability was only 17% in early September, forcing them to reject most new demand connection requests for 2025.
Furthermore, the “regulatory framework” for distribution remains a point of contention, with the company urging regulators to recognize the reality of investment costs.
We forecast modest revenue growth of 0.9% CAGR through 2027, reflecting these structural limitations.
2. Operating Margins: 14.4%
Endesa is benefiting from operational leverage and a favorable gas market. The gas margin reached €10 per megawatt hour, supported by favorable hedging positions.
Additionally, the company is managing costs well, with unitary margins in the supply business remaining resilient despite lower volatility.
We project operating margins to remain robust at 14.4%, as the company continues to optimize its generation mix and benefit from the absence of the extraordinary levy.
3. Exit P/E Multiple: 14.1x
Endesa currently trades at a P/E of roughly 13.6x, which is a premium to its 5-year historical average of 12.3x.
Our model assumes an exit multiple of 14.1x by 2027.
We chose a multiple that allows for some premium due to the company’s quality, but even with this generous assumption, the math doesn’t work in favor of the investor. The current price simply leaves very little room for further multiple expansion to drive returns.
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What Happens If Things Go Better or Worse?
The upside appears strictly limited, with even the “High” case offering below-market returns (these are estimates, not guaranteed returns):
- Low Case: If gas margins compress or regulation tightens further, investors could see a -0.1% annual return (effectively zero growth).
- Mid Case: If the company maintains its current momentum, we project a modest 4.9% annual return, primarily driven by dividends.
- High Case: Even in a bullish scenario where margins expand further, the upside is capped at a 9.2% annual return.
See what analysts think about ELE stock right now (Free with TIKR) >>>
How Much Upside Does Endesa Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
