AMERICAN ELECTRIC POWER (AEP) Stock Fundamental Analysis
NASDAQ:AEP - Nasdaq - US0255371017 - Common Stock - Currency: USD
AEP gets a fundamental rating of 4 out of 10. The analysis compared the fundamentals against 46 industry peers in the Electric Utilities industry. While AEP has a great profitability rating, there are quite some concerns on its financial health. AEP is valied quite expensively at the moment, while it does show a decent growth rate.
1. Profitability
1.1 Basic Checks
In the past year AEP was profitable.
In the past year AEP had a positive cash flow from operations.
AEP had positive earnings in each of the past 5 years.
AEP had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
AEP has a better Return On Assets (2.88%) than 60.87% of its industry peers.
AEP's Return On Equity of 11.00% is fine compared to the rest of the industry. AEP outperforms 71.74% of its industry peers.
AEP has a Return On Invested Capital (3.79%) which is comparable to the rest of the industry.
The Average Return On Invested Capital over the past 3 years for AEP is significantly below the industry average of 45.26%.
The 3 year average ROIC (3.55%) for AEP is below the current ROIC(3.79%), indicating increased profibility in the last year.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 2.88% | ||
| ROE | 11% | ||
| ROIC | 3.79% |
ROA(3y)2.54%
ROA(5y)2.64%
ROE(3y)9.79%
ROE(5y)10.22%
ROIC(3y)3.55%
ROIC(5y)3.47%
1.3 Margins
With a decent Profit Margin value of 15.05%, AEP is doing good in the industry, outperforming 65.22% of the companies in the same industry.
AEP's Profit Margin has improved in the last couple of years.
Looking at the Operating Margin, with a value of 22.54%, AEP is in the better half of the industry, outperforming 65.22% of the companies in the same industry.
AEP's Operating Margin has improved in the last couple of years.
AEP's Gross Margin of 69.90% is fine compared to the rest of the industry. AEP outperforms 67.39% of its industry peers.
AEP's Gross Margin has declined in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 22.54% | ||
| PM (TTM) | 15.05% | ||
| GM | 69.9% |
OM growth 3Y3.41%
OM growth 5Y5.01%
PM growth 3Y0.51%
PM growth 5Y4.04%
GM growth 3Y1.2%
GM growth 5Y-2.58%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), AEP is destroying value.
Compared to 1 year ago, AEP has more shares outstanding
Compared to 5 years ago, AEP has more shares outstanding
Compared to 1 year ago, AEP has an improved debt to assets ratio.
2.2 Solvency
AEP has an Altman-Z score of 0.87. This is a bad value and indicates that AEP is not financially healthy and even has some risk of bankruptcy.
With a decent Altman-Z score value of 0.87, AEP is doing good in the industry, outperforming 63.04% of the companies in the same industry.
A Debt/Equity ratio of 1.55 is on the high side and indicates that AEP has dependencies on debt financing.
AEP has a Debt to Equity ratio (1.55) which is comparable to the rest of the industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.55 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 0.87 |
ROIC/WACC0.58
WACC6.53%
2.3 Liquidity
A Current Ratio of 0.44 indicates that AEP may have some problems paying its short term obligations.
With a Current ratio value of 0.44, AEP is not doing good in the industry: 73.91% of the companies in the same industry are doing better.
AEP has a Quick Ratio of 0.44. This is a bad value and indicates that AEP is not financially healthy enough and could expect problems in meeting its short term obligations.
Looking at the Quick ratio, with a value of 0.31, AEP is doing worse than 76.09% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.44 | ||
| Quick Ratio | 0.31 |
3. Growth
3.1 Past
AEP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 8.89%, which is quite good.
The Earnings Per Share has been growing slightly by 5.71% on average over the past years.
The Revenue has been growing slightly by 3.89% in the past year.
The Revenue has been growing slightly by 4.85% on average over the past years.
EPS 1Y (TTM)8.89%
EPS 3Y5.78%
EPS 5Y5.71%
EPS Q2Q%21.26%
Revenue 1Y (TTM)3.89%
Revenue growth 3Y5.51%
Revenue growth 5Y4.85%
Sales Q2Q%8.71%
3.2 Future
AEP is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 6.65% yearly.
The Revenue is expected to grow by 5.29% on average over the next years.
EPS Next Y5.65%
EPS Next 2Y6.39%
EPS Next 3Y6.72%
EPS Next 5Y6.65%
Revenue Next Year4.79%
Revenue Next 2Y3.93%
Revenue Next 3Y3.76%
Revenue Next 5Y5.29%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
4. Valuation
4.1 Price/Earnings Ratio
AEP is valuated rather expensively with a Price/Earnings ratio of 17.50.
Compared to the rest of the industry, the Price/Earnings ratio of AEP indicates a somewhat cheap valuation: AEP is cheaper than 63.04% of the companies listed in the same industry.
The average S&P500 Price/Earnings ratio is at 25.82. AEP is valued slightly cheaper when compared to this.
The Price/Forward Earnings ratio is 16.20, which indicates a correct valuation of AEP.
Based on the Price/Forward Earnings ratio, AEP is valued a bit cheaper than the industry average as 65.22% of the companies are valued more expensively.
AEP's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 21.76.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 17.5 | ||
| Fwd PE | 16.2 |
4.2 Price Multiples
AEP's Enterprise Value to EBITDA is on the same level as the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 12.29 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
AEP has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)3.1
PEG (5Y)3.06
EPS Next 2Y6.39%
EPS Next 3Y6.72%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 3.61%, AEP has a reasonable but not impressive dividend return.
AEP's Dividend Yield is a higher than the industry average which is at 3.45.
Compared to an average S&P500 Dividend Yield of 2.36, AEP pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.61% |
5.2 History
The dividend of AEP has a limited annual growth rate of 5.62%.
AEP has paid a dividend for at least 10 years, which is a reliable track record.
AEP has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)5.62%
Div Incr Years15
Div Non Decr Years20
5.3 Sustainability
64.17% of the earnings are spent on dividend by AEP. This is not a sustainable payout ratio.
AEP's earnings are growing around the same pace than its dividend. As long as the earnings growth is kept the dividend growth is sustainable.
DP64.17%
EPS Next 2Y6.39%
EPS Next 3Y6.72%
102.88
+1.08 (+1.06%)
Chartmill FA Rating
GICS SectorUtilities
GICS IndustryGroupUtilities
GICS IndustryElectric Utilities
Earnings (Last)
Earnings (Next)
Inst Owners79.74%
Inst Owner Change9.32%
Ins Owners0.02%
Ins Owner Change9.02%
Market Cap54.94B
Analysts70.4
Price Target109.37 (6.31%)
Short Float %3.86%
Short Ratio4.6
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.61% |
Yearly Dividend3.6
Dividend Growth(5Y)5.62%
DP64.17%
Div Incr Years15
Div Non Decr Years20
Ex-Date
Surprises & Revisions
EPS beat(2)1
Avg EPS beat(2)0.23%
Min EPS beat(2)-1.19%
Max EPS beat(2)1.65%
EPS beat(4)3
Avg EPS beat(4)0.3%
Min EPS beat(4)-1.19%
Max EPS beat(4)1.65%
EPS beat(8)4
Avg EPS beat(8)-0.13%
EPS beat(12)7
Avg EPS beat(12)0.66%
EPS beat(16)9
Avg EPS beat(16)0.58%
Revenue beat(2)0
Avg Revenue beat(2)-3.42%
Min Revenue beat(2)-5.22%
Max Revenue beat(2)-1.62%
Revenue beat(4)0
Avg Revenue beat(4)-3.01%
Min Revenue beat(4)-5.22%
Max Revenue beat(4)-0.89%
Revenue beat(8)0
Avg Revenue beat(8)-4.27%
Revenue beat(12)4
Avg Revenue beat(12)2.7%
Revenue beat(16)7
Avg Revenue beat(16)2.82%
PT rev (1m)2.26%
PT rev (3m)6.61%
EPS NQ rev (1m)0.99%
EPS NQ rev (3m)-2.84%
EPS NY rev (1m)-0.24%
EPS NY rev (3m)-0.22%
Revenue NQ rev (1m)-3.08%
Revenue NQ rev (3m)-0.63%
Revenue NY rev (1m)0.1%
Revenue NY rev (3m)0.16%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 17.5 | ||
| Fwd PE | 16.2 | ||
| P/S | 2.79 | ||
| P/FCF | N/A | ||
| P/OCF | 8.07 | ||
| P/B | 2.04 | ||
| P/tB | 2.04 | ||
| EV/EBITDA | 12.29 |
EPS(TTM)5.88
EY5.72%
EPS(NY)6.35
Fwd EY6.17%
FCF(TTM)-1.81
FCFYN/A
OCF(TTM)12.74
OCFY12.39%
SpS36.93
BVpS50.53
TBVpS50.43
PEG (NY)3.1
PEG (5Y)3.06
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 2.88% | ||
| ROE | 11% | ||
| ROCE | 4.94% | ||
| ROIC | 3.79% | ||
| ROICexc | 3.81% | ||
| ROICexgc | 3.81% | ||
| OM | 22.54% | ||
| PM (TTM) | 15.05% | ||
| GM | 69.9% | ||
| FCFM | N/A |
ROA(3y)2.54%
ROA(5y)2.64%
ROE(3y)9.79%
ROE(5y)10.22%
ROIC(3y)3.55%
ROIC(5y)3.47%
ROICexc(3y)3.57%
ROICexc(5y)3.49%
ROICexgc(3y)3.58%
ROICexgc(5y)3.5%
ROCE(3y)4.66%
ROCE(5y)4.55%
ROICexcg growth 3Y2.86%
ROICexcg growth 5Y3.59%
ROICexc growth 3Y2.86%
ROICexc growth 5Y3.6%
OM growth 3Y3.41%
OM growth 5Y5.01%
PM growth 3Y0.51%
PM growth 5Y4.04%
GM growth 3Y1.2%
GM growth 5Y-2.58%
F-Score6
Asset Turnover0.19
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.55 | ||
| Debt/FCF | N/A | ||
| Debt/EBITDA | 5.34 | ||
| Cap/Depr | 229.03% | ||
| Cap/Sales | 39.4% | ||
| Interest Coverage | 2.42 | ||
| Cash Conversion | 86.8% | ||
| Profit Quality | N/A | ||
| Current Ratio | 0.44 | ||
| Quick Ratio | 0.31 | ||
| Altman-Z | 0.87 |
F-Score6
WACC6.53%
ROIC/WACC0.58
Cap/Depr(3y)223.56%
Cap/Depr(5y)219.34%
Cap/Sales(3y)37.81%
Cap/Sales(5y)38.02%
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)8.89%
EPS 3Y5.78%
EPS 5Y5.71%
EPS Q2Q%21.26%
EPS Next Y5.65%
EPS Next 2Y6.39%
EPS Next 3Y6.72%
EPS Next 5Y6.65%
Revenue 1Y (TTM)3.89%
Revenue growth 3Y5.51%
Revenue growth 5Y4.85%
Sales Q2Q%8.71%
Revenue Next Year4.79%
Revenue Next 2Y3.93%
Revenue Next 3Y3.76%
Revenue Next 5Y5.29%
EBIT growth 1Y19.05%
EBIT growth 3Y9.11%
EBIT growth 5Y10.1%
EBIT Next Year85.93%
EBIT Next 3Y30.08%
EBIT Next 5Y21.57%
FCF growth 1Y61.26%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y35.75%
OCF growth 3Y21.01%
OCF growth 5Y9.77%