WEBULL

Black Hills (BKH): Gauging Valuation After Nebraska Rate Settlement Secures Recovery of Major Gas System Investments

Simply Wall St · 1d ago

Black Hills (BKH) just cleared a key regulatory hurdle in Nebraska, winning approval for new natural gas rates that lock in recovery of major system investments and a sizable base rate increase.

See our latest analysis for Black Hills.

The regulatory win lands against a backdrop of solid momentum, with an 18.5 percent year to date share price return and a 1 year total shareholder return of 23.1 percent, suggesting investors are gradually warming to Black Hills growth and risk profile.

If this type of regulated utility story appeals, it could be worth broadening your watchlist and exploring fast growing stocks with high insider ownership for other quietly compounding opportunities.

With Black Hills trading about 11 percent below consensus targets after a strong rebound and regulatory tailwinds, are investors still underestimating its earnings power, or has the market already priced in the next leg of growth?

Most Popular Narrative Narrative: 8.2% Undervalued

With Black Hills last closing at $68.86 versus a most popular narrative fair value of about $75, the valuation case leans toward moderate upside built on steady fundamentals rather than a speculative re rating.

Large scale capital investments such as the Ready Wyoming transmission expansion, Lange II natural gas generation, and Colorado Clean Energy Plan renewables projects are expected to materially expand Black Hills' regulated rate base. This is described as enabling predictable, above sector average long term earnings and net margins through constructive rate recovery mechanisms and innovative tariffs. Successful execution of regulatory strategies including frequent, constructive rate reviews and timely rider mechanisms has ensured rapid recovery of over $1.3B in recent system investments. According to the narrative, this is expected to continue supporting cash flow stability and net margin expansion as capital projects ramp over the next several years.

Read the complete narrative.

The narrative explores how steady mid single digit earnings growth and only modest margin shifts can still be used to support a richer future multiple than today. It also examines which long term revenue assumptions and discount rate mechanics underpin that higher fair value, and how much depends on new regulated assets coming online. The full narrative lays out the detailed earnings path year by year, plus the valuation approach that translates those projections into that specific price target.

Result: Fair Value of $75 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sizable capital spending and reliance on volatile tech driven load mean that regulatory setbacks or customer pullbacks could quickly challenge the optimistic earnings path.

Find out about the key risks to this Black Hills narrative.

Another Lens On Value

On earnings based measures, the picture is less generous. Black Hills trades at about 18.3 times earnings, slightly richer than the global integrated utilities average of 17.9 times but below peers at 19.3 times and under our 20.4 times fair ratio. This hints at only modest upside and little margin for disappointment if growth cools.

See what the numbers say about this price — find out in our valuation breakdown.

NYSE:BKH PE Ratio as at Dec 2025
NYSE:BKH PE Ratio as at Dec 2025

Build Your Own Black Hills Narrative

If you want to dig into the numbers yourself or take a different view on the story, you can build a custom outlook in just a few minutes: Do it your way.

A great starting point for your Black Hills research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

Ready for more investment ideas?

Before you move on, lock in your next opportunities now by using the Simply Wall St Screener to uncover focused stock ideas you will not want to overlook.

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.