Is investing in energy provider SSE a good idea?

SSE is a growth-oriented energy provider that appears to be fairly valued

Here's how to manipulate the price of SSE shares.

Utility companies are typically viewed as defensive investments because they supply necessities like gas, water, and electricity. This is due to the fact that these products are regarded as necessities, so even in times of economic hardship, demand will be largely steady.

However, these sectors will grow far more slowly than the overall economy during times of robust economic expansion. As a result, investors seeking a nice dividend rather than capital growth are more likely to be interested in their shares. But there are exceptions, and SSE, an energy company, is one of them.

Delivering electricity throughout Scotland and southern England is at the heart of SSE's energy business. Even though this is regarded as a low-risk, routine activity, SSE is taking a number of steps to accelerate growth, such as initiating an ambitious 33 billion investment program.

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Start your trial. A portion of the funds will be used to expand its ability to produce renewable energy. The group thinks that consumers will be willing to pay more for renewable energy as the planned shift to a low-carbon economy proceeds.

The network is being upgraded by SSE.

Nonetheless, the majority of SSEs' investmentsroughly two-thirdsare focused on improving their electrical transmission infrastructure. By connecting the producers of renewable energy to the national grid, where the electricity can be transported to those who need it, the idea is that it will be able to generate revenue. SSE should be able to earn a high return on investment if it can complete the various infrastructure projects on schedule and within budget.

SSE is riskier than other UK energy companies because there is, of course, no assurance that these plans will succeed. The company's strategy is predicated on the demand for green energy staying high and energy prices not declining. The potential benefit is higher, though, particularly if the demand for electricity from data centers and other green transition-related industries (like electric cars) quickens the rate at which the economy as a whole needs electricity.

The tactic appears to be working thus far. Normalized earnings per share more than doubled between 2020 and 2025, while SSEs' revenue increased by nearly 50% between 2021 and 2025. The management of SSE anticipates that this trend will continue, estimating that over the next five years, earnings per share will rise by 7 to 9 percent annually, enabling it to raise its dividend by as much as 10 percent annually.

The stock trades at just 14 times projected 2027 earnings despite these optimistic projections, and it has a respectable dividend yield of 2.8%.

Investors appear to be intrigued by SSE's ambitious plans. The price of the shares has increased by 44% over the past year and 26% over the past six months. Additionally, SSE shares are trading above their 200-day and 50-day moving averages.

Therefore, I would advise you to go long at the current price of 2,596p at 1 per 1p. If so, I would set the stop-loss at 1,600p, which would give you a 996p total downside.