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Why FirstEnergy Stock Looks Attractive

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Analyst price targets

Based on analysts’ estimates, FirstEnergy (FE) stock has a target price of $44.0—compared to its current market price of $39.4. The target price indicates an estimated upside of 11.5% for the next 12 months.

Among the 17 analysts tracking FirstEnergy, four recommended a “strong buy,” nine recommended a “buy,” and four recommended a “hold.” None of the analysts recommended FirstEnergy stock as a “sell” as of April 5.

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Valuation

FirstEnergy stock was one of the top performers among utilities last year. In the last 12 months, the stock has risen ~15%. The stock has tracked broader utilities (XLU).

Currently, FirstEnergy stock is trading at 15.5x its forward earnings, which is much lower than its peer’ average. FirstEnergy’s five-year historical PE ratio is ~17x. Xcel Energy (XEL) stock is trading at a valuation multiple of 21x, while Consolidated Edison (ED) is trading at 19x. FirstEnergy appears to be trading at a discount compared to its peers and its historical average. Utilities seem overvalued given their lower earnings growth compared to broader markets. FirstEnergy yields 3.7%, which is higher than the average.

FirstEnergy’s improved focus on regulated operations will likely bode well for its earnings growth in the long term. The company aims to grow its EPS 6%–8% per year through 2021, which is higher than the industry average.

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