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FirstEnergy’s Valuation after Its Q3 2018 Earnings

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Dec. 4 2020, Updated 10:53 a.m. ET

FirstEnergy’s market performance

Investors have taken FirstEnergy’s transformation to a pure-play regulated utility really well. So far, the stock has risen more than 23% in 2018 and has outperformed broader utilities. The Utilities ETF (XLU), a representative of the S&P 500 Utilities, has risen ~3% during the same period. FirstEnergy forms ~2.4% in XLU.

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Valuation

Currently, FirstEnergy stock is trading at a forward PE multiple of 14.8x—lower than peers’ average forward PE multiple of over 17x. FirstEnergy stock is trading at a forward EV-to-EBITDA valuation of 9.3x—compared to peers’ forward EV-to-EBITDA valuation of 11x.

Exelon (EXC), the biggest utility by revenues in the country, is trading at a forward PE multiple of 14x. Exelon’s forward EV-to-EBITDA multiple is at ~9x.

FirstEnergy stock offers a dividend yield of 3.8%—higher than broader utilities’ average. The Utilities Select Sector SPDR ETF (XLU) is trading at a yield of 3.3%. FirstEnergy is expected to pay an annualized dividend of $1.44 per share in 2018.

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