NGG

We rate NATIONAL GRID PLC (NGG) as a Buy with a composite score of 67.6/100 at a current price of $92.35. The stock scores above average across the majority of our six quantitative factors and ranks #172 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in stability (89th percentile) and value (76th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a No Moat rating (29/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; 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.

NATIONAL GRID PLC holds a mid-tier position (#34 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 67.6/100 places it at rank #172 in our full 7,333-stock universe. With a $52.1B market capitalization, NATIONAL GRID PLC operates at meaningful scale within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, providing competitive advantages in distribution, procurement, and customer reach.

Despite positive momentum (73th percentile), revenue contraction of -6% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 99% (+43.8pp vs sector) narrow to operating margins of 27% (+9.3pp vs sector) and net margins of 15.8%, yielding a gross-to-net conversion rate of 16%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $92.35, NATIONAL GRID PLC appears undervalued relative to its fundamentals. Our value factor score of 76/100 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. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 58.3x (a 245% premium to the sector median of 16.9x), EV/EBITDA of 3.9x (discounted to peers), P/B of 1.8x, P/S of 0.9x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to NATIONAL GRID PLC. The stock presents a balanced risk profile: significant leverage (126% debt-to-equity) and low beta of 0.05 — while defensive, this may indicate limited upside participation in bull markets. 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 (126% debt-to-equity); low beta of 0.05 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 58.3x) that leaves limited margin for error. 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 89th percentile and quality factor at the 70th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 99% provide a buffer against cost pressures; above-average stability (89th percentile) suggests predictable business dynamics; large-cap scale ($52.1B) 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 NATIONAL GRID PLC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 30.7%, and the balance sheet is managed within acceptable parameters (D/E: 126%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; NATIONAL GRID PLC 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, NATIONAL GRID PLC receives a Buy rating with a composite score of 67.6/100 (rank #172 of 7,333). Our quantitative framework assigns a No Moat (29/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 71/100.

Our analysis supports a constructive view on NATIONAL GRID PLC. The combination of the current valuation, medium uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.