WEC

We rate WEC ENERGY GROUP, INC. (WEC) as a Reduce with a composite score of 43.6/100 at a current price of $115.90. 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 momentum (41th percentile), which together account for the majority of the composite score. Offsetting weakness in value (26th percentile) and quality (30th percentile) tempers our overall conviction. We assign a Narrow Moat rating (48/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress; valuation compression risk if growth disappoints. 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.

WEC ENERGY GROUP, INC. 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 43.6/100 places it at rank #3046 in our full 7,333-stock universe. With a $36.9B market capitalization, WEC ENERGY GROUP, INC. 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 19%, though momentum at the 41th 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 69% (+14.3pp vs sector) narrow to operating margins of 23% (+5.4pp vs sector) and net margins of 15.2%, yielding a gross-to-net conversion rate of 22%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $115.90, WEC ENERGY GROUP, INC. is trading at a premium to fundamental value. Our value factor score of 26/100 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 premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 25.2x (a 49% premium to the sector median of 16.9x), EV/EBITDA of 26.3x (at a premium), P/B of 2.6x, P/S of 4.1x. 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 WEC ENERGY GROUP, INC.. The stock presents a balanced risk profile: significant leverage (142% debt-to-equity) and weak quality scores (30th 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 (142% debt-to-equity); weak quality scores (30th percentile); low beta of 0.10 — 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 30th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 69% provide a buffer against cost pressures; above-average stability (95th percentile) suggests predictable business dynamics; a 3.07% dividend yield anchors total return. 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 WEC ENERGY GROUP, INC.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 10.5%, and the balance sheet is managed within acceptable parameters (D/E: 142%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; WEC ENERGY GROUP, INC. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 3.07% dividend yield provides some income return, but 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, WEC ENERGY GROUP, INC. receives a Reduce rating with a composite score of 43.6/100 (rank #3046 of 7,333). Our quantitative framework assigns a Narrow Moat (48/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 45/100.

Our analysis does not support a constructive view on WEC ENERGY GROUP, INC. at this time. The combination of the current quantitative profile, 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.