ELC

We rate ENTERGY LOUISIANA, LLC (ELC) as a Reduce with a composite score of 48.6/100 at a current price of $21.10. 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 (96th percentile) and value (53th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (19th percentile) and momentum (29th percentile) tempers our overall conviction. We assign a No Moat rating (34/100), Medium uncertainty, and Standard 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.

ENTERGY LOUISIANA, LLC 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 48.6/100 places it at rank #2242 in our full 7,333-stock universe. With a $11.5B market capitalization, ENTERGY LOUISIANA, LLC 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 12%, though momentum at the 29th 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% (-4.0pp vs sector) narrow to operating margins of 29% (+11.8pp vs sector) and net margins of 18.3%, yielding a gross-to-net conversion rate of 36%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $21.10, ENTERGY LOUISIANA, LLC is trading near fair value based on current fundamentals. Our value factor score of 53/100 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 4.1x (a 76% discount to the sector median of 16.9x), EV/EBITDA of 1.7x (discounted to peers), P/B of 0.7x, P/S of 0.8x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to ENTERGY LOUISIANA, LLC. The stock presents a balanced risk profile: significant leverage (183% debt-to-equity) and weak quality scores (35th 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 (183% debt-to-equity); weak quality scores (35th percentile); low beta of 0.15 — 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 96th percentile and quality factor at the 35th 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 (96th percentile) suggests predictable business dynamics. 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 ENTERGY LOUISIANA, LLC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 17.0%, and the balance sheet is managed within acceptable parameters (D/E: 183%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; ENTERGY LOUISIANA, LLC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, ENTERGY LOUISIANA, LLC receives a Reduce rating with a composite score of 48.6/100 (rank #2242 of 7,333). Our quantitative framework assigns a No Moat (34/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 46/100.

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