AEP

Quick Report on American Electric Power Company (AEP)

We've been asking ourselves recently if the market has placed a fair valuation on American Electric Power Company. Let's dive into some of the fundamental values of this large-cap Utilities company to determine if there might be an opportunity here for value-minded investors.

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

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. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 17.53 and an average price to book (P/B) ratio of 1.71. In contrast, American Electric Power Company has a trailing 12 month P/E ratio of 18.3 and a P/B ratio of 1.66.

American Electric Power Company's PEG ratio is 4.11, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

An Unconvincing Cash Flow History With a Downwards Trend:

2018 2019 2020 2021 2022 2023
Revenue (MM) $16,196 $15,561 $14,918 $16,792 $19,640 $19,286
Revenue Growth n/a -3.92% -4.13% 12.56% 16.96% -1.8%
Gross Margins 17% 17% 20% 20% 18% 18%
Operating Margins 17% 17% 20% 20% 18% 18%
Net Margins 12% 12% 15% 15% 12% 12%
Net Income (MM) $1,931 $1,921 $2,200 $2,488 $2,307 $2,258
Net Interest Expense (MM) $984 $1,072 $1,166 $1,199 $1,396 $1,740
Depreciation & Amort. (MM) $2,287 $2,514 $2,683 $2,826 $3,203 $3,095
Earnings Per Share $3.9 $3.88 $4.42 $4.96 $4.49 $4.34
EPS Growth n/a -0.51% 13.92% 12.22% -9.48% -3.34%
Diluted Shares (MM) 494 495 497 502 513 529
Free Cash Flow (MM) -$1,088 -$1,781 -$2,413 -$1,820 -$1,384 -$3,460
Capital Expenditures (MM) $6,311 $6,051 $6,246 $5,660 $6,672 $7,690
Current Ratio 0.48 0.4 0.44 0.46 0.51 0.6
Long Term Debt (MM) $33,117 $25,127 $28,986 $32,204 $34,315 $36,716
Net Debt / EBITDA 7.35 5.74 5.85 5.9 6.04 6.35

American Electric Power Company has slimmer gross margins than its peers, an unconvincing cash flow history, and a highly leveraged balance sheet. On the other hand, the company benefits from weak revenue growth and increasing reinvestment in the business and positive EPS growth. Furthermore, American Electric Power Company has average net margins with a stable trend.

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.

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