Can National Grid plc’s Share Price Return To 836p?

Will National Grid plc (LON: NG) be able to return to its previous highs?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

ng

Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to return to historic highs.

Today I’m looking at National Grid(LSE: NG) (NYSE: NGG.US) to ascertain if its share price can return to 836p.

Initial catalyst

Of course, before we can establish whether or not National Grid can return to 863p, we need to figure out what caused it to reach this level in the first place.  It would appear that National Grid reached this all-time high during May of last year, as investors sought out rock-solid defensive stocks, amid the uncertain global economic environment. In addition, this peak of 863p was the end of a great run for National Grid, which saw its share price by an impressive 20% in the five months preceding this high. 

Nevertheless, since reaching 836p National Grid has fallen back along with its peers in the wider utility sector, after Labour Leader Ed Miliband suggested that he would cap utility prices if elected in 2015.  

But can National Grid return to its former glory?

However, despite these comments from Mr Miliband, I feel that National Grid is well positioned to ride out any further political uncertainty. Indeed, due to National Grid’s dominance over the UK’s electricity distribution and supply network, it appears as if regulators are willing to let the company exercise a certain degree of control over the market. 

For example, the energy regulator Ofgem and National Grid have recently been working together to alleviate the risk of power shortages within the UK. Around 20% of Britain’s power plants are set to close within the next few years and this is going to put a strain on the country’s power grid. So, National Grid has been given additional powers, including the ability to recommission mothballed gas power stations to help keep the lights on.

What’s more, Ofgem has recognised that National Grid provides an essential service to the UK, so the regulator put pricing controls in place last year that favoured the company. As a result, it is likely that National Grid will be allowed to continue raising prices every year, at least in line with inflation, which is likely to push earnings higher and drive a return to 836p.

In addition, National Grid is investing billions developing its business within the United States and this growth coupled with rising prices here within the UK should boost profits. 

Foolish summary

Overall, National Grid’s dominant position here within the UK and growth overseas lead me to conclude the company can stage a return to 836p.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Rupert does not own any share mentioned within this article. 

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »