Briefing From The Editor -- AEP Stock

American Electric Power Company logged a 0.9% change during today's evening session, and is now trading at a price of $80.71 per share.

American Electric Power Company returned losses of -19.0% last year, with its stock price reaching a high of $105.6 and a low of $79.7. Over the same period, the stock underperformed the S&P 500 index by -26.0%. As of April 2023, the company's 50-day average price was $84.46. American Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. Based in Columbus, OH, the large-cap Utilities company has 16,974 full time employees. American Electric Power Company has offered a 4.1% dividend yield over the last 12 months.

The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:

2020-02-20 2021-02-25 2022-02-24 2023-02-23
Revenue (MM) $15,561 $14,918 $16,792 $19,640
Gross Margins 67.2% 70.7% 67.4% 63.9%
Operating Margins 17.7% 20.0% 20.4% 19.2%
Net Margins 12.35% 14.75% 14.82% 11.75%
Net Income (MM) $1,921 $2,200 $2,488 $2,307
Net Interest Expense (MM) -$1,072 -$1,166 -$1,199 -$1,396
Depreciation & Amort. (MM) -$2,514 -$2,683 -$2,826 -$3,203
Earnings Per Share $3.88 $4.42 $4.95 $3.85
EPS Growth n/a 13.92% 11.99% -22.22%
Diluted Shares (MM) 495 497 503 515
Free Cash Flow (MM) n/a $3,762 $3,721 $5,070
Capital Expenditures (MM) n/a $71 $119 $218
Net Current Assets (MM) -$51,836 -$55,631 -$57,136 -$59,882
Current Ratio 0.4 0.44 0.63 0.65
Long Term Debt (MM) $25,127 $28,986 n/a n/a
Net Debt / EBITDA 5.31 5.52 n/a n/a

American Electric Power Company has a steady stream of strong cash flows and growing revenues and decreasing reinvestment in the business. Additionally, the company's financial statements display wider gross margins than its peer group and average operating margins with a stable trend. However, the firm has a highly leveraged balance sheet. Finally, we note that American Electric Power Company has flat EPS growth.

American Electric Power Company's Valuation Is in Line With Its Sector Averages:

American Electric Power Company has a trailing twelve month P/E ratio of 21.9, compared to an average of 22.89 for the Utilities sector. Based on its EPS guidance of $5.6, the company has a forward P/E ratio of 15.1. The 7.6% compound average growth rate of American Electric Power Company's historical and projected earnings per share yields a PEG ratio of 2.88. This suggests that these shares are overvalued. Furthermore, American Electric Power Company is likely overvalued compared to the book value of its equity, since its P/B ratio of 1.74 is higher than the sector average of 1.03. The company's shares are currently trading 20.7% above their Graham number.

There's an Analyst Consensus of Some Upside Potential for American Electric Power Company:

The 14 analysts following American Electric Power Company have set target prices ranging from $87.5 to $113.0 per share, for an average of $97.82 with a buy rating. As of April 2023, the company is trading -13.7% away from its average target price, indicating that there is an analyst consensus of some upside potential.

American Electric Power Company has a very low short interest because 1.3% of the company's shares are sold short. Institutions own 76.6% of the company's shares, and the insider ownership rate stands at 0.03%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 10% stake in the company is worth $3,931,246,444.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.