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AEP

American Electric Power Company NasdaqGS:AEP Stock Report

Last Price

US$103.78

Market Cap

US$53.3b

7D

4.3%

1Y

15.7%

Updated

14 Aug, 2022

Data

Company Financials +
AEP fundamental analysis
Snowflake Score
Valuation3/6
Future Growth1/6
Past Performance2/6
Financial Health1/6
Dividends4/6

AEP Stock Overview

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.

American Electric Power Company Competitors

Price History & Performance

Summary of all time highs, changes and price drops for American Electric Power Company
Historical stock prices
Current Share PriceUS$103.78
52 Week HighUS$104.81
52 Week LowUS$80.22
Beta0.35
1 Month Change8.99%
3 Month Change4.42%
1 Year Change15.71%
3 Year Change15.02%
5 Year Change43.82%
Change since IPO213.30%

Recent News & Updates

Aug 03

American Electric Power: Solid Future Growth Prospect At An Attractive Valuation

American Electric Power posted stellar Q2 2022 results beating the market revenue estimates by a staggering 16.5%. AEP announced quarterly dividend of $0.78 payable on September 9, 2022, giving us an annualized dividend yield of 3.11% at the current price level. The company has reaffirmed its non-GAAP EPS estimates for FY22 in the range of $4.87-$5.07. I assign a buy rating for AEP after taking into consideration all these factors. Investment Thesis American Electric Power Company, Inc. (AEP) is America's leading electric utility company headquartered in Columbus, Ohio. In this thesis, I will primarily analyze AEP's Q2 2022 results and its future growth drivers. I will also analyze the risks faced by the company and its valuation at current price levels. I believe AEP is a growth company with a stable dividend yield. I assign a buy rating for AEP after taking into consideration all these factors. Company Overview AEP is an electric utility company providing electricity across 11 states, catering to more than 5 million customers. It is one of the largest electricity-providing companies in the United States. The company generates, transmits, and distributes electricity to direct consumers and also to other electricity companies. It has around 224,000 circuit miles of distribution lines to deliver electricity to individual households and commercial properties. The company has nearly 22,500 MWs of regulated electricity generating capacity. It generates electricity through various methods, some of them being environment-friendly sources. AEP primarily generates electricity through nuclear, hydro, solar, wind, coal, and natural gas sources and methods. The great advantage that the company enjoys in the market is the vertical integration of its production, transmission, and distribution facilities. This integration ensures the smooth functioning of activities with limited dependence on external sources. Q2 2022 Results AEP posted stellar Q2 2022 results beating the market revenue estimates by a staggering 16.5%. The reported EPS was in line with the market expectation. The company has also reaffirmed the FY22 revenue and EPS guidance. AEP is also planning on increasing its renewable energy portfolio to 50% by 2030 and is in talks to acquire several renewable energy assets to attain that goal. It witnessed strong demand and is expecting a steady demand throughout FY22. SEC:10Q AEP AEP reported revenue from vertically integrated utilities of $2.6 billion, a 16.8% increase compared to Q2 2021 revenue of $2.2 billion. As per my analysis, the increase in electricity prices complimented by increased demand was the primary revenue driver. The revenue from transmission and distribution utilities was $1.3 billion, a 19% increase from $1.09 billion in the same quarter the previous year. The price rise was the main contributing factor to the revenue increase. The company reported total revenue of $4.6 billion, a 21% increase compared to $3.8 billion in the corresponding quarter last year. I believe the company will maintain its revenue in FY22 and FY23 by increasing its generation capacity and expanding its operation in other states. The company reported total expenses of $3.6 billion, compared to $3 billion in Q2 2021, a 20% increase. As per my analysis, the commodity price rise and labor cost were the primary factors in increased expenses. It reported a non-GAAP net income of $617.7 million, compared to $589.5 million in Q2 2021, a 5% increase. The increase could be even higher if we ignore the one-time equity loss of $165 million from unconsolidated subsidiaries. The non-GAAP EPS was reported at $1.20. The company also announced a dividend of $0.78 payable on September 9, 2022. This gives us an annualized dividend yield of 3.11% at the current price level. Overall, the company posted strong Q2 2022 results with considerable improvement across segments. The company has reaffirmed its non-GAAP EPS estimates for FY22 in the range of $4.87-$5.07. I believe the EPS estimates of the company are conservative, and as per my estimates, the FY22 EPS could be in the range of $5.10-$5.25. The company is constantly trying to expand its operations and increase its renewable energy portfolio, which I believe will be crucial for the company's growth in the coming years. Nicholas K. Akins, AEP chairman, president and chief executive officer, stated,

Shareholder Returns

AEPUS Electric UtilitiesUS Market
7D4.3%3.4%3.2%
1Y15.7%8.3%-10.2%

Return vs Industry: AEP exceeded the US Electric Utilities industry which returned 8.3% over the past year.

Return vs Market: AEP exceeded the US Market which returned -10.2% over the past year.

Price Volatility

Is AEP's price volatile compared to industry and market?
AEP volatility
AEP Average Weekly Movement3.2%
Electric Utilities Industry Average Movement3.4%
Market Average Movement7.7%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: AEP is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: AEP's weekly volatility (3%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
190616,688Nick Akinshttps://www.aep.com

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. It operates through Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing segments. The company generates electricity using coal and lignite, natural gas, nuclear, hydro, solar, wind, and other energy sources.

American Electric Power Company Fundamentals Summary

How do American Electric Power Company's earnings and revenue compare to its market cap?
AEP fundamental statistics
Market CapUS$53.32b
Earnings (TTM)US$2.57b
Revenue (TTM)US$17.92b

20.7x

P/E Ratio

3.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
AEP income statement (TTM)
RevenueUS$17.92b
Cost of RevenueUS$9.71b
Gross ProfitUS$8.21b
Other ExpensesUS$5.63b
EarningsUS$2.57b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)5.01
Gross Margin45.80%
Net Profit Margin14.37%
Debt/Equity Ratio154.7%

How did AEP perform over the long term?

See historical performance and comparison

Dividends

3.0%

Current Dividend Yield

61%

Payout Ratio
We’ve recently updated our valuation analysis.

Valuation

Is AEP undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for AEP?

Other financial metrics that can be useful for relative valuation.

AEP key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue5.1x
Enterprise Value/EBITDA13.2x
PEG Ratio2.6x

Price to Earnings Ratio vs Peers

How does AEP's PE Ratio compare to its peers?

AEP PE Ratio vs Peers
The above table shows the PE ratio for AEP vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average24.9x
EXC Exelon
24.2x8.6%US$45.9b
XEL Xcel Energy
25.5x6.7%US$41.5b
SO Southern
27.5x7.9%US$83.0b
DUK Duke Energy
22.4x7.5%US$84.9b
AEP American Electric Power Company
20.7x7.8%US$53.3b

Price-To-Earnings vs Peers: AEP is good value based on its Price-To-Earnings Ratio (20.7x) compared to the peer average (24.9x).


Price to Earnings Ratio vs Industry

How does AEP's PE Ratio compare vs other companies in the US Electric Utilities Industry?

Price-To-Earnings vs Industry: AEP is good value based on its Price-To-Earnings Ratio (20.7x) compared to the US Electric Utilities industry average (21.8x)


Price to Earnings Ratio vs Fair Ratio

What is AEP's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

AEP PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio20.7x
Fair PE Ratio24.2x

Price-To-Earnings vs Fair Ratio: AEP is good value based on its Price-To-Earnings Ratio (20.7x) compared to the estimated Fair Price-To-Earnings Ratio (24.2x).


Share Price vs Fair Value

What is the Fair Price of AEP when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: AEP ($103.78) is trading above our estimate of fair value ($101.35)

Significantly Below Fair Value: AEP is trading above our estimate of fair value.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.


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Future Growth

How is American Electric Power Company forecast to perform in the next 1 to 3 years based on estimates from 13 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


7.8%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: AEP's forecast earnings growth (7.8% per year) is above the savings rate (1.9%).

Earnings vs Market: AEP's earnings (7.8% per year) are forecast to grow slower than the US market (14.5% per year).

High Growth Earnings: AEP's earnings are forecast to grow, but not significantly.

Revenue vs Market: AEP's revenue (3% per year) is forecast to grow slower than the US market (7.9% per year).

High Growth Revenue: AEP's revenue (3% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: AEP's Return on Equity is forecast to be low in 3 years time (11.3%).


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Past Performance

How has American Electric Power Company performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


10.2%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: AEP has high quality earnings.

Growing Profit Margin: AEP's current net profit margins (14.4%) are lower than last year (14.8%).


Past Earnings Growth Analysis

Earnings Trend: AEP's earnings have grown by 10.2% per year over the past 5 years.

Accelerating Growth: AEP's earnings growth over the past year (10.1%) is below its 5-year average (10.2% per year).

Earnings vs Industry: AEP earnings growth over the past year (10.1%) underperformed the Electric Utilities industry 10.1%.


Return on Equity

High ROE: AEP's Return on Equity (10.6%) is considered low.


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Financial Health

How is American Electric Power Company's financial position?

Financial Health Score

1/6

Financial Health Score 1/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: AEP's short term assets ($9.4B) do not cover its short term liabilities ($12.4B).

Long Term Liabilities: AEP's short term assets ($9.4B) do not cover its long term liabilities ($54.1B).


Debt to Equity History and Analysis

Debt Level: AEP's net debt to equity ratio (151.5%) is considered high.

Reducing Debt: AEP's debt to equity ratio has increased from 118.2% to 154.7% over the past 5 years.

Debt Coverage: AEP's debt is not well covered by operating cash flow (15.4%).

Interest Coverage: AEP's interest payments on its debt are well covered by EBIT (3.1x coverage).


Balance Sheet


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Dividend

What is American Electric Power Company current dividend yield, its reliability and sustainability?

Dividend Score

4/6

Dividend Score 4/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


3.01%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: AEP's dividend (3.01%) is higher than the bottom 25% of dividend payers in the US market (1.47%).

High Dividend: AEP's dividend (3.01%) is low compared to the top 25% of dividend payers in the US market (3.95%).


Stability and Growth of Payments

Stable Dividend: AEP's dividends per share have been stable in the past 10 years.

Growing Dividend: AEP's dividend payments have increased over the past 10 years.


Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (60.6%), AEP's dividend payments are covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: AEP is paying a dividend but the company has no free cash flows.


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Management

How experienced are the management team and are they aligned to shareholders interests?

4.6yrs

Average management tenure


CEO

Nick Akins (62 yo)

11.58yrs

Tenure

US$15,051,215

Compensation

Mr. Nicholas K. Akins, also known as Nick, has been the Chief Executive Officer of American Electric Power Company, Inc. since November 12, 2011 and its President since January 1, 2011 to October 2011. Mr....


CEO Compensation Analysis

Compensation vs Market: Nick's total compensation ($USD15.05M) is about average for companies of similar size in the US market ($USD12.88M).

Compensation vs Earnings: Nick's compensation has been consistent with company performance over the past year.


Leadership Team

Experienced Management: AEP's management team is considered experienced (4.6 years average tenure).


Board Members

Experienced Board: AEP's board of directors are considered experienced (5.9 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 2.7%.


Top Shareholders

Company Information

American Electric Power Company, Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: American Electric Power Company, Inc.
  • Ticker: AEP
  • Exchange: NasdaqGS
  • Founded: 1906
  • Industry: Electric Utilities
  • Sector: Utilities
  • Implied Market Cap: US$53.315b
  • Shares outstanding: 513.73m
  • Website: https://www.aep.com

Number of Employees


Location

  • American Electric Power Company, Inc.
  • 1 Riverside Plaza
  • Columbus
  • Ohio
  • 43215-2373
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/14 00:00
End of Day Share Price2022/08/12 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.