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Wondering if NRG Energy is still a smart buy after its huge run up, or if the easy money has already been made? Let us break down what the current price really implies about its value.
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Despite a recent pullback of around 4% over the last week and 3.1% over the last month, NRG is still up an impressive 72.7% year to date and 77.6% over the past year, with a staggering 446.9% gain over three years.
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Those kinds of returns have been fueled by NRG’s strategic pivot toward higher margin retail and home services, along with aggressive capital returns to shareholders through buybacks and dividends. At the same time, investors have been reacting to shifting expectations around power demand, decarbonization policy, and the company’s evolving role in the broader US energy transition.
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Even with all that momentum, NRG scores a 3/6 valuation check, suggesting the market may be partially pricing in its strengths but not fully. We will unpack what that means using multiple valuation lenses, then finish with a more intuitive way to think about fair value that many investors overlook.
NRG Energy delivered 77.6% returns over the last year. See how this stacks up to the rest of the Electric Utilities industry.
A Discounted Cash Flow model projects the cash NRG Energy is expected to generate in the future, then discounts those cash flows back into today’s dollars to estimate what the business is worth right now.
NRG generated trailing twelve month free cash flow of about $2.0 billion, and analyst forecasts, combined with Simply Wall St extrapolations, see this rising steadily toward roughly $5.4 billion by 2035. The two stage Free Cash Flow to Equity model takes higher near term growth and then tapers it to more modest long term assumptions, discounting each year’s projected cash flow back using a required return for shareholders.
On this basis, the model arrives at an estimated intrinsic value of about $567 per share. Compared with the current market price, the DCF suggests NRG is trading at roughly a 71.8% discount to its fair value, indicating investors may be underestimating the durability and growth of its future cash generation.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests NRG Energy is undervalued by 71.8%. Track this in your watchlist or portfolio, or discover 911 more undervalued stocks based on cash flows.
NRG Discounted Cash Flow as at Dec 2025
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for NRG Energy.
For profitable companies like NRG Energy, the price to earnings, PE, ratio is a straightforward way to gauge how much investors are willing to pay today for each dollar of current earnings. It links directly to profitability, making it a useful cross check against more complex models like DCF.
What counts as a normal or fair PE depends on how fast earnings are expected to grow and how risky those earnings are. Higher growth and lower risk generally justify a higher multiple, while slower or uncertain growth argues for a discount. NRG currently trades on a PE of about 22.34x, slightly above the Electric Utilities industry average of around 20.09x and its peer group at roughly 19.46x. This suggests the market is already assigning it a premium versus many competitors.
Simply Wall St’s Fair Ratio refines this picture. It estimates what NRG’s PE should be, around 36.60x, based on its growth outlook, profitability, industry, market cap and risk profile, rather than just simple peer comparisons. Because it incorporates these fundamentals, the Fair Ratio is a more tailored benchmark. With the Fair Ratio well above today’s 22.34x, this lens indicates that NRG still looks undervalued on an earnings multiple basis.
Result: UNDERVALUED
NYSE:NRG PE Ratio as at Dec 2025
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1457 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page that lets you write the story behind your numbers. You can link your view of a company’s future revenue, earnings and margins to a forecast and fair value, then compare that Fair Value to today’s Price to help inform your decision. The whole view updates automatically as new news or earnings arrive. For NRG Energy, one investor might build a bullish Narrative around accelerating data center power deals, smart home integration and rising margins that supports a fair value closer to around $208 per share. Another investor might focus on gas exposure, regulatory and execution risks, softer power prices and a lower earnings multiple to arrive at a more conservative value near the low $90s. Both perspectives are made explicit, quantified and easy to track over time.
Do you think there’s more to the story for NRG Energy? Head over to our Community to see what others are saying!
NYSE:NRG 1-Year Stock Price Chart
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include NRG.
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