Drax Group plc (DRXGF)
OvervaluedFundamental
42
Price
$815.50
Market Cap
$2.72B
Part 1 · What the company is worth
Overview
Drax generates and supplies electricity in the United Kingdom, using biomass — wood pellets it manufactures itself, mostly in North America — to fuel its converted coal power station in North Yorkshire, alongside a portfolio of hydro, pumped-storage and gas plants. It sells the pellets it grows and presses through its own supply chain rather than buying them on the open market, then burns them for baseload power that qualifies as renewable under UK subsidy schemes.
How it makes money
Drax earns money three ways: manufacturing wood pellets, generating electricity from them and from hydro/gas assets, and selling that power — plus power bought from others — to industrial and business customers. Much of its biomass output is government-subsidised through the Renewables Obligation and Contracts for Difference, which fix part of its revenue regardless of the wholesale price; the rest, from flexible gas and hydro generation, is exposed to swings in the wholesale electricity market.
Competitive moat
No identified moat · NoneDrax sells a commodity — electricity — into a wholesale market where dozens of generators compete on price. Its subsidies fix part of its revenue but do not protect it from competitors; its biomass supply chain and pumped-storage assets lower its own costs without giving it pricing power over customers who can buy power from anyone.
What drives demand
Moderately cyclicalUK electricity demand itself is fairly stable, but Drax's earnings are not: a portion of its biomass generation is paid a subsidised top-up regardless of the market price, while its flexible gas and hydro plants, and the power it resells to business customers, are exposed to swings in wholesale prices driven by weather, fuel costs and the wider energy market.
Key risks
- Dependence on government support schemes — The Renewables Obligation (ending 2027) and Contracts for Difference arrangements underpin biomass economics; if schemes are not renewed or replaced, that part of the revenue base disappears.
- Biomass sourcing and sustainability rules — Drax operates an extensive biomass sourcing and tracking policy; failing to meet the sustainability criteria that qualify pellets for subsidy support could disqualify part of its output.
- Wholesale power price exposure — Unsubsidised flexible generation is exposed to swings in wholesale electricity prices, mitigated only partly by forward hedging.
- Operational and weather disruption — Grid connection failures, planned outages and asset delays — such as those affecting the Cruachan pumped-storage plant — can cut output at short notice.
The case for
Buyers argue that subsidised biomass generation gives Drax a predictable cash flow base most power generators lack, that its hydro and pumped-storage fleet is a scarce, hard-to-replicate asset in a system needing more flexible capacity, and that the pellet business insulates margins from fuel-price swings other generators face.
The case against
Sellers worry that Drax's economics depend on political goodwill that could turn against burning wood for power, that the biomass sourcing and sustainability claims underpinning its subsidies invite scrutiny, and that once support schemes expire the company is left competing on wholesale electricity prices like any other generator.
Written by the editors, published on August 18, 2026
Direct competitors
Who this company fights with for the same customers
Generated on September 18, 2026 with claude-haiku-4-5 — shared with all users
SSE is the other large UK-listed generator selling renewable and flexible power into the same GB wholesale market and capacity auctions Drax bids into.
Centrica competes both in GB flexible generation and storage and, through British Gas Business, for the same industrial and commercial electricity customers Drax Energy Solutions supplies.
Enviva is the world's largest industrial wood pellet producer and bids for the same long-term supply contracts with European and Asian power utilities that Drax's pellet business targets.
RWE Generation UK runs a large fleet of gas, biomass and battery plants in Britain, competing with Drax for the same dispatchable power and grid-balancing revenue.
Graanul Invest is Europe's largest wood pellet producer and sells into the same industrial biomass demand from European utilities that Drax's North American plants serve.
Balance Sheet & Liquidity
Revenue
$5.05B
Trailing 12 months to the last reported quarter — estimated from per-share metrics
Net Income
$18M
Trailing 12 months to the last reported quarter — estimated from per-share metrics
Free Cash Flow
$274M
Total Equity
$1.74B
Total Liabilities
$1.20B
Current Ratio
1.07
Interest Coverage
-
Debt/EBITDA
1.59
Earnings Per Share
Revenue & Net Income
Free Cash Flow
Income Breakdown
Historical statement
Margins over time
Debt over time
How heavy the debt is
Growth grid
Growth — Revenue
Fair Value Estimation
Fair Value
$351.72
Current Price
$815.50
Margin of Safety
-131.9%
Fair Value Range
$228.62 - $474.82
Spread across the valuation methods used, not a statistically calibrated confidence interval.
Estimation Methods
Valuation Metrics
P/E Ratio
14908.59
ROE
0.8%
P/B Ratio
162.03
P/FCF
993.60
Gross Margin
25.9%
ROIC
15.2%
Profitability Radar
Value Creation (Economic Moat)
ROIC
15.2%
WACC
6.1%
ROIC − WACC
+9.1 pp
ROIC exceeds the cost of capital — the company is creating value for shareholders.
Fundamental Analysis Criteria
Passed (9)
- Price CAGR 8.07%
- ROIC 15.2%
- Debt/Equity ratio
- Positive Free Cash Flow
- Current Ratio
- Debt/EBITDA
- Analyst Consensus 65% Buy
- Earnings Surprise avg 9.5%
- Earnings Quality (OCF/NI) 7.25
Failed (11)
- Gross Margin 25.9%
- P/FCF 993.60
- P/B Ratio 162.03
- Operating Margin 4.0%
- CapEx intensity
- Price below Graham Number
- DCF valuation (Overvalued)
- ROE 3.9%
- Revenue Growth 5Y 4.8%
- Net Margin Trend 1.4% vs 8.5%
- Piotroski F-Score 2/9
Unavailable (7)
- EPS data insufficient
- Dividend Payout NaN%
- Interest Coverage
- Return on Tangible Assets
- Low reliance on intangibles
- PEG Ratio (need PE > 0 and growth > 0)
- Share Dilution (missing shares data)
Piotroski F-Score
Serious financial concerns
Earnings Quality
High quality: earnings backed by cash
Share Dilution
Buying back shares. Shareholder friendly
Institutional Holdings
No institutional filings reported for this company.
Governance
Executive Team
| Name | Title | Age |
|---|---|---|
| Mr. Dwight Daniel Willard Gardiner | Group CEO & Executive Director | 61 |
| Mr. Frank Hendrikus Lemmink | CFO & Executive Director | 57 |
| Mr. Lee Dawes | Chief Operations Officer | - |
| Mr. Mark Strafford | Head of Investor Relations | - |
| Ms. Hillary Berger | Group General Counsel | - |
| Ms. Farnaz Ranjbar | Chief People Officer | 55 |
| Mr. Paul Sheffield | Chief Commercial Officer | - |
| Mr. Tim Cole | Head of Customer Marketing | - |
| Mr. Ross McKenzie | Chief Corporate Affairs & Sustainability Officer | - |
| Hannah Steedman | Chief Strategy & Transformation Officer | - |
Audit Risk
5
Board Risk
3
Compensation Risk
1
Shareholder Rights Risk
1
Part 2 · The price and when to enter
This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.
Latest News
Recent headlines for DRXGF, sourced from Markets Gazette.