AES Corporation’s Valuation after Its 1Q17 Earnings
At $7 billion, AES Corporation (AES) seems to be trading at a relatively fair valuation compared to the industry average. However, it seems to be trading at a premium to its historical average. On May 8, 2017, it was trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 8.3x. Its five-year historical EV-to-EBITDA multiple is near 7.6x. The industry average is a little over 10x.
Industry giant Duke Energy (DUK) is currently trading at a valuation multiple of 10.0x, while NextEra Energy (NEE) is trading at a multiple near 12.2x. Dominion Resources’ valuation ratio is just above 15x. Southern Company’s (SO) ratio is near 12x.
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The EV-to-EBITDA ratio gives a comparative idea of a company’s valuation, regardless of its capital structure. EV is the combination of a company’s market capitalization and debt minus its cash holdings.
Utilities (XLU) have largely traded near an average PE (price-to-earnings) multiple of 15x in the last several years. However, they’re currently trading at a PE multiple beyond 20x.
Although AES has underperformed its peers in terms of market performance, its dividend profile is attractive and beats many large-cap peers. To learn more about its dividends, read Comparing AES’s Dividend Profile with Its Peers. To compare Southern Company and Duke Energy’s dividend profiles, read Southern Company and Duke Energy: A Dividend Face-Off.