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 19.1 and a P/B ratio of 1.73.
American Electric Power Company's PEG ratio is 4.27, 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.
Growing Revenues With Increasing Reinvestment in the Business:
| 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% |
| Operating Margins | 17% | 17% | 20% | 20% | 18% | 18% |
| Net Margins | 12% | 12% | 15% | 15% | 12% | 12% |
| Net Income (MM) | $1,931 | $1,920 | $2,197 | $2,488 | $2,306 | $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 |
| Diluted Shares (MM) | 494 | 495 | 497 | 502 | 513 | 521 |
| Free Cash Flow (MM) | $5,209 | $4,273 | $3,833 | -$1,820 | -$1,384 | -$3,460 |
| Current Ratio | 0.48 | 0.4 | 0.44 | 0.46 | 0.51 | 0.6 |
| Total Debt (MM) | $23,347 | $26,744 | $31,108 | $34,558 | $36,801 | $39,489 |
| Net Debt / EBITDA | 4.65 | 5.19 | 5.42 | 5.48 | 5.43 | 5.94 |
