Is AES (AES) Undervalued? A Fresh Look at Valuation After Recent Share Price Pullback

AES (AES) stock has seen some movement recently, drawing attention from investors exploring the utilities sector. Over the past month, the share price has dipped nearly 5%. Its year-to-date gain stands at around 6%.

See our latest analysis for AES.

While AES’s share price has pulled back about 5% in the past month, the stock is still showing year-to-date share price gains and has rebounded from its earlier lows. Momentum has cooled compared to earlier in the year; the 1-year total shareholder return is roughly flat, and returns over three and five years remain negative. This suggests that previous long-term headwinds continue to weigh on performance even as short-term sentiment improves.

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With shares trading at a discount to analyst targets and some signs of recovery in recent performance, the key question remains: is AES now undervalued, or has the market already factored in its growth prospects?

Most Popular Narrative: 4.1% Undervalued

Compared to its last close price of $13.87, the most widely followed narrative assigns AES a fair value of $14.46. This suggests a modest gap that could catch the eye of value-oriented investors.

AES's leading, long-term pipeline of renewables and energy storage projects, backed by robust, multi-year Power Purchase Agreements (PPAs) with data center and corporate customers, positions the company to capitalize on rapidly rising electricity demand from AI/data centers. This supports accelerating revenue growth and increasing visibility on future cash flows.

Read the complete narrative.

Want to know what’s fueling this narrative? There is a game-changing assumption about future profit margins and a bold call about ongoing demand. Curious which numbers could sway the valuation either way? You will want to see the projections and logic that underpin this fair value calculation.

Result: Fair Value of $14.46 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, execution risks such as supply chain challenges or shifts in tax incentives could quickly change the outlook for AES’s growth story.

Find out about the key risks to this AES narrative.

Build Your Own AES Narrative

If you see things differently or want to dig into the numbers yourself, you can shape your own investment story in just a few minutes. Do it your way.

A great starting point for your AES research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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