The Southern Company (SO) Intrinsic Value & DCF Valuation
Regulated Electric · NYSE
Current Price
$85.72
Intrinsic Value
$69.09
-24.1% margin of safety
What Is The Southern Company's Intrinsic Value?
As of 2026-10-07, the base-case DCF model estimates the intrinsic value of The Southern Company (SO) at $69.09 per share, compared with a market price of $85.72, a margin of safety of -24.1%. The base case assumes 7.2% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $57.91 to $81.81. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is The Southern Company (SO) Undervalued?
At the current price of $85.72, SO trades above the base-case intrinsic value estimate by a meaningful margin. By this model the stock looks expensive, though faster growth than assumed would change the picture.
COMPETITIVE MOAT
↑Regulated Monopoly Infrastructure
Southern Company operates as a regulated utility, granting it exclusive rights to provide electricity in its service territories. This creates a natural monopoly with high barriers to entry.
↑Essential Service Demand
Electricity is a non-discretionary service for households and businesses. Demand remains relatively stable regardless of economic cycles, providing consistent revenue streams.
↑Long-Lived Asset Base
The company's extensive network of power generation, transmission, and distribution assets represents a significant capital investment. These assets have long useful lives, requiring substantial new investment to replicate.
INVESTMENT RISKS
↓Extreme Weather Events
Severe weather can disrupt operations, damage infrastructure, and lead to significant repair costs. This can also result in lost revenue and potential regulatory penalties.
↓Interest Rate Sensitivity
As a capital-intensive business, Southern Company relies heavily on debt financing. Rising interest rates increase borrowing costs, impacting earnings and dividend sustainability.
↓Technological Disruption
Emerging technologies like distributed generation and energy storage could potentially reduce reliance on traditional utility models. This could erode customer base and revenue over the long term.
Base case
SO base case valuation
Intrinsic Value
$69.09
Margin of safety
-24.1%
Expected annual return
-4.2%
Base case assumptions: 7.2% annual growth, 10.0% discount rate, 30x exit multiple, 5 year projection. Data as of 2026-10-07.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the SO valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for The Southern Company respond.
Open DCF Calculator for SOCompany Overview
The Southern Company operates as an energy utility, primarily involved in the production, transmission, and distribution of electricity. Its operations are segmented into Gas Distribution Operations, Gas Pipeline Investments, Wholesale Gas Services, and Gas Marketing Services. The company also undertakes the development, construction, acquisition, ownership, and management of various power generation assets, including renewable energy ventures, and supplies electricity to the wholesale market. Complementing its power business, it distributes natural gas in Illinois, Georgia, Virginia, and Tennessee, while also offering gas marketing services, wholesale gas services, and managing gas pipeline investments. Its extensive portfolio of generating assets includes 30 hydroelectric, 24 fossil fuel, three nuclear, 13 combined cycle/cogeneration, 45 solar, 15 wind, one fuel cell, and four battery storage facilities. In terms of natural gas infrastructure, the company builds, operates, and maintains 76,289 miles of pipelines and 14 storage facilities with a total capacity of 157 billion cubic feet, delivering natural gas to residential, commercial, and industrial clients. The Southern Company serves approximately 8.7 million electric and gas utility customers in total. Furthermore, it provides digital wireless communications and fiber optics services. The company was founded in 1945 and maintains its corporate headquarters in Atlanta, Georgia.
Financial Metrics — SO Stock Valuation Data
Revenue/Share (TTM)
$26.54
FCF/Share (TTM)
$2.26
ROIC (TTM)
4.1%
ROE (TTM)
12.6%
P/FCF
38.3x
EV/EBITDA
12.2x
FCF Yield
2.60%
Debt/Equity
1.95x
Based on trailing twelve-month data, SO shows a free cash flow per share of $2.26 and a ROIC of 4.1%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 38.3x and FCF yield of 2.60% are important context metrics when evaluating SO's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of SO?
The Southern Company currently generates $2.26 in free cash flow per share. At the current price of $85.72, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is SO undervalued?
SO trades at a P/FCF ratio of 38.3x with a free cash flow yield of 2.60%. This P/FCF is in a moderate range. However, whether SO is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value SO stock using DCF?
To perform a DCF valuation on The Southern Company: (1) Start with the trailing free cash flow per share ($2.26) as the base, (2) project future FCF growth over 5-10 years based on Regulated Electric industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting SO's risk profile — with a debt-to-equity of 1.95x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to SO?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For The Southern Company, this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Regulated Electric trends, then discounting those amounts to today's dollars. SO's ROIC of 4.1% means the company's return on invested capital sits below the level that typically clears its cost of capital.
How does WACC affect SO stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For SO, with a debt-to-equity ratio of 1.95x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 12.2x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See SO PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Utilities valuationsDCF and P/E value SO with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-10-07. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.