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The Southern Company (SO) Stock Analysis — Fair Value, Risk & Moat Rating

NYQ · Utilities · Utilities - Regulated Electric

$93.51 -1.00 (-1.1%) As of Apr 20, 2026
Overall Verdict High Risk
0.99
Altman Z-ScoreDistress Zone
$92.50
Fair ValueOvervalued -1.1%
1.9
Moat RatingWeak moat · eroding
TL;DR · Audit Summary

Is The Southern Company a safe investment right now?

The Southern Company's Altman Z-Score of 0.99 places it in the distress zone. Our DCF model estimates intrinsic value at $92.50, suggesting the stock is overvalued by 1%. Moat rating: 1.9/5 stars.

Section 01 · Bankruptcy Risk

Could The Southern Company go bankrupt? Altman Z-Score analysis

0.99

Z-Score of 0.99 falls below the 1.8 distress threshold, indicating significant financial stress.

  • Below 1.8 — Distress Zone (high bankruptcy risk)
  • 1.8 to 3.0 — Gray Zone (elevated uncertainty)
  • Above 3.0 — Safe Zone (financially healthy)

What drives SO's Z-Score?

Altman Z-Score components for SO
ComponentFormulaValueWeightContribution
A · Working Capital / Total AssetsWC / TA-0.0381.2-0.05
B · Retained Earnings / Total AssetsRE / TA0.09871.40.14
C · EBIT / Total AssetsEBIT / TA0.04183.30.14
D · Market Cap / Total LiabilitiesMCap / TL0.97150.60.58
E · Revenue / Total AssetsRev / TA0.18121.00.18

How has SO's financial health changed over time?

3.0 Safe1.8 Distress0.01.02.03.04.02016201720182019202020212022202320242025
SO Z-Score history
YearZ-ScoreZone
20161.72Distress
20171.3Distress
20181.01Distress
20190.91Distress
20201.15Distress
20211.19Distress
20221.07Distress
20230.98Distress
20241.06Distress
20250.99Distress

Source: Calculated from SO's latest 10-K filing on SEC EDGAR.

Section 02 · Fair Value Estimate (Value-Speculation)

What could The Southern Company be worth? (High Uncertainty)

Value-Speculation Classification: This stock has fundamental underpinnings but is priced on growth expectations. Fair value estimated with wider uncertainty bands.
Blended Fair Value · FVL Estimate$92.50
vs
Market Price · today$93.51

Fair value range: $92.50 — $92.50

Margin of Safety -1.1% Growth-adjusted estimate suggests 1.1% premium to fair value. Range $92-$92. This stock is priced for continued high growth.

Valuation Methods Used

FVL multi-factor valuation breakdown
MethodFair ValueWeightDetail
Historical PE × Forward EPS$92.5050%18.8x avg PE (4 years) × $4.92 forward EPS
DCF (Discounted Cash Flow)$0.0030%Two-stage DCF: $0.6B TTM FCF, 20.0% growth, 7.0% WACC

Assumptions & Data Sources

Valuation model inputs
ParameterValueSource
FCF Growth Rate (Stage 1)20.0%70% analyst consensus + 30% historical
Analyst EPS Growth (This Year)6.2%Consensus (18 analysts)
Analyst EPS Growth (Next Year)7.6%Consensus
Historical 5Y FCF CAGR88.9%SEC EDGAR
Terminal Growth Rate2.5%Long-term GDP proxy
Discount Rate (WACC)7.0%CAPM (Rf=4.3% + 0.5*5.5%)
Net Cash / (Debt)$-72,436MBalance sheet
Base FCF (TTM)$0.6BTrailing 12 months
Shares Outstanding1,127,304,104Latest

Sensitivity Analysis

DCF intrinsic value at different growth & WACC assumptions
Growth Rate8% WACC10% WACC7.0% WACC13% WACC
0%$9.21$6.81$11.21$4.91
2.5%$10.66$7.82$13.03$5.59
5.0%$12.33$8.98$15.13$6.35
7.5%$14.60$10.53$18.01$7.36

Free Cash Flow History

SO Free Cash Flow history
YearFCFGrowth
2016$0.6B
2017$0.6B+5.4%
2018$−2.4BN/A
2019$−1.0BN/A
2020$−1.1BN/A
2021$−1.8BN/A
2022$−0.8BN/A
2023$−1.4BN/A
2024$−1.6BN/A
2025$−1.5BN/A

Source: FCF data from SEC EDGAR filings. Price via Yahoo Finance.

Section 03 · Competitive Moat

Does The Southern Company have a durable competitive advantage?

★½☆☆☆
Weak moat · eroding

Moat rating: 1.9/5.

What makes up SO's moat score?

ROIC Stability

★☆☆☆☆

ROIC variability over the past decade. Score: 1/5.

Gross Margin Trend

★★★☆☆

Gross margin trajectory over the past decade. Score: 3/5.

Switching Costs

★★☆☆☆

Estimated customer lock-in based on margin level. Score: 2/5.

How stable is SO's return on invested capital?

0%-5%-1%4%8%12%2016201720182019202020212022202320242025
SO ROIC history
YearROICTrend
20166.0%
20176.6%Stable
20184.7%Declining
20192.4%Declining
20204.0%Rising
20217.3%Rising
20224.4%Declining
20233.3%Declining
20244.4%Rising
20254.7%Stable

Source: ROIC calculated from SEC EDGAR filings.

Section 04 · Dividend Safety

Is The Southern Company's dividend safe?

B Dividend Safety Grade
Yield325.0%
Payout Ratio75.0%
Consecutive Years45
5Y Growth Rate-22.3%

Can The Southern Company afford its dividend?

Payout ratio is 75.0%. FCF covers the dividend 0.1x. 45 consecutive years of payments.

Section 05 · Financial Summary

The Southern Company's key financial metrics

SO financial summary
MetricLatest1Y Ago3Y AgoTrend
Revenue $25.3B $29.3B $20.4B Rising
Net Income $4.0B $0.9B N/A
Free Cash Flow −$1.5B −$1.6B −$0.8B Declining
Section 06 · FAQ

Common questions about The Southern Company

Is The Southern Company at risk of going bankrupt?

The Southern Company's Altman Z-Score of 0.99 places it in the distress zone. This metric uses balance sheet ratios to predict bankruptcy probability within 2 years. A score below 1.8 signals distress, while above 3.0 indicates safety.

What is The Southern Company's intrinsic value based on DCF?

Our DCF model estimates The Southern Company's intrinsic value at $92.50 per share. The current margin of safety is -1.1%. This estimate is based on historical free cash flow trends and a risk-adjusted discount rate.

Does The Southern Company have a competitive moat?

The Southern Company receives a moat rating of 1.9 out of 5 stars, based on ROIC stability, gross margin trends, and estimated switching costs. A rating above 3.5 suggests a durable competitive advantage.

Is The Southern Company's dividend safe?

Our dividend safety analysis examines payout ratio, free cash flow coverage, and the company's streak of consecutive dividend payments to determine whether the current payout is sustainable.

SO · Value Investing Quiz

Before you invest in The Southern Company, make sure you truly understand it.

A deep understanding of a company's fundamentals, risk profile, and competitive position dramatically increases your investment accuracy and odds of success.

Pass the quiz to earn the SO Certified Value Investor badge.

FairValueLabs Disclaimer

All valuations, scores, ratings, and classifications on this page are produced by the FairValueLabs internal valuation system. They do not represent actual market value, guaranteed outcomes, or professional investment advice. These are analytical estimates for educational and research purposes only.

This is not financial advice. All data is sourced from SEC EDGAR public filings. Always consult a qualified financial advisor before making investment decisions.

Last updated: Apr 20, 2026. Data sources: SEC EDGAR (financial statements), Yahoo Finance (market data, analyst consensus). Data may not reflect the most recent quarter.

SO analysis methodology: How we calculate fair value, Z-Scores, and moat ratings