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Fortis Inc earns a 3-star quantitative star rating, reflecting our opinion that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 3% discount to our quantitative fair value estimate of $55.08 per share, which is reinforced by this estimate's low uncertainty rating.

The firm's valuation metrics strengthen our estimated fair value. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. Reflecting the firm's valuation is its enterprise value to market value ratio of 2.0, which sits in the top 20% compared with global peers. While highly leveraged firms can be risky, they can also be highly rewarding. This company's high enterprise value relative to its market value suggests that wise investments will yield outsize returns for investors. We believe this is a sign that shares could be undervalued.

The company's balance sheet is an additional encouraging factor. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. The firm's EBITDA/interest coverage ratio of 3.9, for example, sits in the bottom 30% compared with global peers. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. This characteristic further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.