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How AES Is Valued Compared to Its Peers



AES: Valuation

AES (AES) stock seems to be trading at a premium valuation compared to its historical valuation multiple. On July 25, the stock was trading at an EV[1. enterprise value]-to-EBITDA valuation multiple of 8.5x. Its five-year historical multiple is 8.0x.

NRG Energy (NRG) is trading at an EV-to-EBITDA valuation of 11.0x compared to its five-year historical average valuation of 11.0x. The stock seems to be trading at a fair valuation compared to its historical valuation. NRG is currently trading at a PE valuation multiple of 10.6x.

AES stk

The chart above depicts AES’s steep rally compared to utilities (XLU) so far this year. It should be noted that AES outperformed the broader markets by a huge margin this year.

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Expected Q2 2018 earnings

AES is expected to report its second-quarter earnings on August 7. It’s expected to report EPS of $0.28. In the same quarter last year, EPS was $0.25. AES has a huge exposure to competitive operations. It has a large presence overseas as well, which makes its earnings somewhat unstable. AES reported adjusted EPS of $0.28 in Q1 2018, which beat consensus estimates, implying an earnings growth of 65% year-over-year.

Amid increased trade war tensions in the last few weeks, investors have turned to utilities, mainly due to their higher dividend yields and stable stock price movements. To learn more about top-yielding utilities, be sure to read Do You Own Any of These Top-Yielding S&P 500 Utilities Stocks?


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