DUK

We rate Duke Energy CORP (DUK) as a Reduce with a composite score of 47.5/100 at a current price of $128.55. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (95th percentile) and value (42th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (33th percentile) and momentum (38th percentile) tempers our overall conviction. We assign a No Moat rating (33/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Duke Energy CORP holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.5/100 places it at rank #2417 in our full 7,333-stock universe. With a $107.3B market capitalization, Duke Energy CORP operates at meaningful scale within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 17%, though momentum at the 38th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 51% (-4.1pp vs sector) narrow to operating margins of 27% (+9.3pp vs sector) and net margins of 16.1%, yielding a gross-to-net conversion rate of 32%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $128.55, Duke Energy CORP is trading near fair value based on current fundamentals. Our value factor score of 42/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 19.0x (roughly in line with the sector median of 16.9x), EV/EBITDA of 11.4x (at a premium), P/B of 1.9x, P/S of 3.1x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to Duke Energy CORP. The stock presents a balanced risk profile: significant leverage (265% debt-to-equity) and weak quality scores (33th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (265% debt-to-equity); weak quality scores (33th percentile); low beta of -0.05 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 95th percentile and quality factor at the 33th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 51% provide a buffer against cost pressures; above-average stability (95th percentile) suggests predictable business dynamics; large-cap scale ($107.3B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Duke Energy CORP's capital allocation as Poor. Key concerns include elevated leverage (265% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Duke Energy CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Duke Energy CORP receives a Reduce rating with a composite score of 47.5/100 (rank #2417 of 7,333). Our quantitative framework assigns a No Moat (33/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 50/100.

Our analysis does not support a constructive view on Duke Energy CORP at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.