A Look At Downer EDI (ASX:DOW) Valuation After Earnings Guidance Dividend Increase And Share Buy Back

Simply Wall St.

Feb 26

Downer EDI (ASX:DOW) has attracted fresh attention after releasing its half year 2025 results, issuing new 2026 earnings guidance, declaring a higher fully franked interim dividend, and confirming ...

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See our latest analysis for Downer EDI. The recent earnings update, higher interim dividend and progress on the buy back have coincided with a 7 day share price return of 10.09% and a year to date share price return of 6.64%, while the 1 year total shareholder return of 55.88% and 3 year total shareholder return of about 3x indicate that momentum has been strong over both shorter and longer periods. If these results have you rethinking where growth could come from next, it may be worth scanning our list of 24 power grid technology and infrastructure stocks as another way to find infrastructure linked opportunities. With earnings guidance now on the table, a higher dividend locked in and the buy back completed, the key question is whether A$8.51 still reflects a discount to intrinsic value or if the market is already pricing in future growth. AdvertisementMost Popular Narrative: 3.4% Overvalued Downer EDI's most followed narrative pegs fair value at A$8.23, slightly below the last close of A$8.51, which puts the current price just ahead of that model.  The anticipated growth in the addressable market for high-voltage projects driven by the transitional energy tailwind suggests a significant increase in demand for Downer's services, potentially growing revenue significantly as the market expands over the next five years.  Read the complete narrative. Curious what kind of earnings uplift, margin rebuild and future profit multiple are baked into that fair value line that A$8.23 sits on? Try the full narrative. Result: Fair Value of A$8.23 (OVERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, there is still the risk that project execution issues or softer government infrastructure spending could pressure margins and leave those A$8.23 valuation assumptions looking optimistic. Find out about the key risks to this Downer EDI narrative. Another View: Big Gap Between DCF And Market Price Our DCF model comes to a very different conclusion, with a fair value estimate of A$34.22 versus the current A$8.51 share price, which implies DOW is trading at a steep discount. If that gap persists, is the DCF being too generous, or is the market being too cautious? Look into how the SWS DCF model arrives at its fair value. DOW Discounted Cash Flow as at Feb 2026Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Downer EDI for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 6 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. Next Steps If this mix of optimism and caution has you undecided, now is a good time to look through the details yourself and stress test the assumptions behind both views, then weigh up 3 key rewards and 2 important warning signs before you make your own call. Looking for more investment ideas? If you are weighing what comes after Downer EDI, do not stop at one company. Broaden your watchlist with ideas that fit your own risk and income goals.  Target steadier compounding potential by checking out 6 high quality undervalued stocks that pair quality fundamentals with prices that sit below their estimated worth. Boost your income focus by scanning 9 dividend fortresses that combine higher yields with an emphasis on dividend resilience. Protect your downside first by reviewing 6 resilient stocks with low risk scores that score well on balance sheet strength and risk metrics before you commit fresh capital.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    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\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"shareholding","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}