FirstEnergy’s Valuation Compared to Its Peers




FirstEnergy (FE) stock was one of the top performers among utilities last year. In the last 12 months, the stock has risen ~25% and beat broader utilities. Currently, FirstEnergy is trading at a forward PE ratio of 16x based on analysts’ earnings estimates for 2019. Utilities at large are trading at a valuation multiple of 17x–18x. FirstEnergy’s five-year historical PE ratio is ~17x. FirstEnergy looks to be trading at a discount compared to its peers and its historical average.


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Dull future growth

FirstEnergy’s earnings are expected to display flattish growth this year compared to 2018. The company might look a little overvalued compared to earnings growth in the broader markets. Generally, utilities grow very slowly. What makes them attractive is their slow and stable stock price movements along with relatively higher dividend yields. FirstEnergy is trading at a dividend yield of 3.7%.

Xcel Energy (XEL) is trading at a forward PE ratio of 21x, while PPL (PPL) is trading at a forward PE ratio of 15x. Xcel Energy and PPL generate most of their earnings from regulated operations. Xcel Energy stock has risen 25%, while PPL has risen ~15% in the last 12 months.

Read Comparing Southern Company’s Current Valuation with Peers’ to learn about top utility (XLU) (IDU) stocks’ valuations.


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