Edison International

Methodology

Edison International's Southern California electric utility generates relatively predictable earnings from regulated operations, though wildfire liabilities create significant tail risks. The utility provides essential service but faces extraordinary wildfire exposure. Fair value calculations must account for wildfire mitigation costs and potential liability reserves that add volatility to otherwise stable utility earnings.

Methodology

Edison typically trades at PEG ratios between 1.0-2.0x, below typical utility valuations due to wildfire risk concerns in California. The company's rate base growth and cost recovery mechanisms support earnings visibility. PEG appears attractive but reflects legitimate discount for catastrophic wildfire liability exposure that differentiates Edison from typical utilities.

Methodology

Edison pays a dividend yielding 4-5%, making PEGY more attractive than PEG, though dividend sustainability depends on wildfire liability management. The regulated business supports dividend payments but wildfire costs create uncertainty. Total return relies on yield component, though investors demand premium yields given California wildfire risks.