Evergy (EVRG): Is the Recent Pullback a Buying Opportunity in a High-Growth Utility?

The recent pullback in Evergy Inc. (EVRG) has sparked renewed interest among investors, particularly given the company's long-term growth prospects and its position in the utility sector. With a stock price hovering near $73.50 as of November 2025 and a P/E ratio of 21.53, Evergy appears undervalued relative to the broader utility sector, which trades at an average P/E of 22.26. However, the question remains: Is this dislocation a genuine buying opportunity, or does it mask execution risks that could undermine the company's long-term potential?

Valuation Dislocation: A Compelling Case for Undervaluation

Evergy's valuation metrics suggest a meaningful discount to sector averages. The company's enterprise value to EBITDA (EV/EBITDA) ratio stands at 6.16, significantly below the utility sector's 13.44 multiple. This discrepancy is striking, especially considering Evergy's robust capital investment plan of $17.5 billion, which is projected to drive 8.5% annual rate base growth through 2029. Such a plan positions the company to capitalize on the sector's broader tailwinds, including electrification and AI-driven energy demand, which are fueling optimism about future earnings.

Moreover, Evergy's adjusted EPS guidance for 2025-narrowed to $3.92 to $4.02-reflects a midpoint of $4.02, implying a forward P/E of approximately 18.3x if the stock price remains near current levels. This is well below the sector's forward P/E of 18.5x, suggesting the market may be discounting Evergy's execution risks more aggressively than its peers. The company's dividend increase of 4% to $0.6950 per share further enhances its appeal as a yield-focused investment, particularly in a rising interest rate environment.

Execution Risks: Navigating Regulatory and Operational Challenges

Despite its attractive valuation, Evergy faces execution risks that warrant scrutiny. Regulatory headwinds, including FERC Order 881 and NERC's expanded jurisdiction over inverter-based resources, are complicating capital project timelines. These mandates require utilities to adapt operational practices and invest in compliance infrastructure, potentially delaying returns on Evergy's $17.5 billion investment plan.

Operational challenges also persist. Milder summer weather in 2025 reduced cooling degree days by 26%, directly impacting revenue. While the company has offset some of these losses through regulated investment recoveries, its non-regulated investments in early-stage clean energy ventures remain a drag, with unrealized losses that Evergy plans to mitigate through asset disposal. Additionally, performance-based regulation (PBR) frameworks in states like Kansas and Missouri tie revenue to reliability metrics such as SAIDI and SAIFI. Failure to meet these targets could result in financial penalties, adding another layer of risk to Evergy's earnings trajectory.

For patient investors, the current pullback offers an opportunity to acquire shares at a discount to intrinsic value, provided they are comfortable with the near-term volatility. Evergy's capital-intensive growth plan and alignment with secular trends in energy demand provide a strong foundation for long-term appreciation. That said, investors should monitor the company's ability to execute its rate case settlements and manage non-regulated losses, as these factors could influence near-term performance.

Balancing the Equation: A Strategic Buy for Patient Investors

The interplay between valuation dislocation and execution risks creates a nuanced investment case. Evergy's discounted multiples relative to the sector suggest the market is pricing in a worst-case scenario for regulatory and operational hurdles. However, the company's reaffirmed long-term EPS growth target of 4% to 6% through 2029, coupled with its progress on Kansas and Missouri energy projects, indicates management's confidence in navigating these challenges.

Conclusion

Evergy's valuation dislocation, driven by a combination of sector-wide optimism and company-specific risks, presents a compelling case for a strategic entry point. While regulatory and operational challenges are real, they are not insurmountable for a utility with a strong balance sheet and a clear growth trajectory. For investors with a multi-year horizon, the current discount to sector multiples may justify the risk, particularly as Evergy's capital investments begin to materialize in the latter half of the decade.