Critical Comparison: AES (AES) & Pepco (POM)

AES (NYSE: AES) and Pepco (NYSE:POM) are both mid-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitability, risk, analyst recommendations and dividends.

Earnings & Valuation

This table compares AES and Pepco’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AES $13.59 billion 0.54 -$1.13 billion ($1.17) -9.44
Pepco N/A N/A N/A $1.25 21.56

Pepco has lower revenue, but higher earnings than AES. AES is trading at a lower price-to-earnings ratio than Pepco, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares AES and Pepco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AES -5.43% 15.14% 2.47%
Pepco 10.52% 11.08% 2.95%

Analyst Ratings

This is a breakdown of recent recommendations for AES and Pepco, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AES 0 3 2 0 2.40
Pepco 0 0 0 0 N/A

AES currently has a consensus price target of $12.88, indicating a potential upside of 16.62%. Given AES’s higher possible upside, equities research analysts clearly believe AES is more favorable than Pepco.

Insider & Institutional Ownership

93.1% of AES shares are held by institutional investors. 1.1% of AES shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

AES pays an annual dividend of $0.48 per share and has a dividend yield of 4.3%. Pepco pays an annual dividend of $1.08 per share and has a dividend yield of 4.0%. AES pays out -41.0% of its earnings in the form of a dividend. Pepco pays out 86.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pepco has raised its dividend for 5 consecutive years. AES is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

AES beats Pepco on 8 of the 13 factors compared between the two stocks.

About AES

The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.

About Pepco

Pepco Holdings LLC, formerly Pepco Holdings, Inc., is a holding company. The Company, through its utility subsidiaries, is engaged in the transmission, distribution and default supply of electricity, and the distribution and supply of natural gas. The Company’s segments include Power Delivery, Pepco Energy Services, and Corporate and Other. The Company’s subsidiaries include Potomac Electric Power Company (Pepco), Delmarva Power & Light Company (DPL) and Atlantic City Electric Company (ACE). Pepco is engaged in the transmission, distribution and default supply of electricity. DPL is involved in the transmission, distribution and default supply of electricity, and distribution and supply of natural gas. ACE is engaged in the transmission, distribution and default supply of electricity. The Company’s subsidiaries own and operate a network of wires, substations and other equipment that are classified as transmission facilities, distribution facilities or common facilities.

Receive News & Ratings for AES Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for AES and related companies with MarketBeat.com's FREE daily email newsletter.

Latest News

Leave a Reply