Meridian Energy (NZSE:MEL) Stock Questions Profit Quality Behind Rich P/E

Meridian Energy heads into this earnings day with the stock down over the past week, month and quarter, yet still trading around NZ$5.50 and on a very rich P/E of 112x. The immediate price reaction only shows that traders are focused on the latest headline. The real story is in what these results indicate about profit quality and valuation.

The headline this time is simple. Meridian Energy has swung back into profit over the last twelve months and is now paying a higher dividend, yet the stock still trades at a steep discount to one discounted cash flow estimate of fair value. That tension between a high multiple and implied undervaluation is what matters next.

Is Meridian Energy a genuine 47.8% discount, or just an expensive stock with a stretched 112.1x P/E and fragile dividend cover? See how the current market price compares with our valuation analysis for Meridian Energy

FY 2026 Earnings Summary

• Revenue FY 2026 vs. FY 2025 (PCP): NZ$3,883m vs. NZ$4,835m (revenue declined 19.7%)
• Net Income FY 2026 vs. FY 2025 (PCP): NZ$130m profit vs. NZ$452m loss (returned to profit)
• Basic EPS FY 2026 vs. FY 2025 (PCP): NZ$0.049 per share vs. a loss of NZ$0.173568 per share (moved back into positive territory)
• EBITDAF FY 2026 vs. FY 2025 (PCP) (Earnings Before Interest, Tax, Depreciation, Amortisation and Fair value movements): NZ$1.05b vs. NZ$0.61b (EBITDAF increased by about 72%)

Tired of staring at walls of earnings tables and raw figures around Meridian Energy with no clear story? See the full visual breakdown of Meridian Energy's valuation picture in an easy-to-read dashboard format through the company report for Meridian Energy.

Meridian’s stronger earnings back the renewable utility story

For investors who see Meridian Energy as a core renewable utility, the latest numbers lean in your favour. EBITDAF rose to NZ$1.05b with net profit moving from a loss in FY 2025 to NZ$130m in FY 2026. Operating cash flow of NZ$810m and net debt to EBITDAF improving to about 1.6x support the idea of a relatively resilient balance sheet. Higher retail volumes through June and July and a 7.1% lift in the full year dividend also fit a picture of a business with steady demand and cash generation.

Short term headwinds still matter for Meridian investors

The bearish case for Meridian Energy focuses on earnings sensitivity and capital demands, and the results do not fully dismiss that concern. Revenue declined 19.7% year on year even as profit recovered, helped by very strong hydrology that may not repeat. Operating expenses rose about 8% and management expects capex to step up from NZ$261m to a guided NZ$370m to NZ$410m in FY 2027. Net debt is expected to peak above 3x EBITDAF during the build phase, so the business will be leaning more on its balance sheet while committing to large projects.

After rising capex guidance, higher net debt targets and a dividend that free cash flow does not fully cover, it is worth asking if these are isolated pressure points or early signs of broader strain. Review our independent risk analysis for Meridian Energy which shows 1 important warning sign

Stay Ahead With Simply Wall St

If Meridian Energy's mix of a high P/E, a discounted cash flow estimate of fair value and rising capex has your attention, register for free with Simply Wall St and add it to a Watchlist to track share price moves against valuation and wait for a setup that fits your plan. Once you own the stock, use the Portfolio Command Center to cut through market noise and focus on the key alerts that matter for your holdings. For a broader view, tap into crowd insights and sentiment through the Community so you can see how other investors are thinking about the same risks and opportunities. By surfacing potential catalysts and pressure points early, you give yourself a better chance to act ahead of the wider market.

Seeking Alternatives Beyond Meridian Energy

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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.

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