What BlackRock’s $38B Bid Means for AES Valuation in 2025

If you have been watching AES lately and wondering whether now is the time to make a move, you are not alone. The past few weeks have been anything but boring for this power company, and the stock has been catching the eye of analysts, investors, and anyone following major infrastructure news. Just look at the numbers, with AES jumping 3.6% in the last week and a powerful 16.5% over the past month. That is a massive reversal from where it stood a year ago, down 11.6%, and the company is still nursing longer-term losses over three and five years.

But what is driving this recent excitement? Much of it traces back to major headlines about BlackRock’s Global Infrastructure Partners, who are rumored to be in advanced talks to buy AES for a mammoth $38B. If a deal of that magnitude materializes, it could signal a seismic shift in how the market values the company, as well as the whole utilities sector.

This brings us straight to the core question: Is AES undervalued, or is all this recent growth already baked into its price? To help answer that, we have put the company through six different valuation checks. AES passes five out of six, putting its current value score at 5 and marking it as a clear stand-out compared to peers.

Curious how we land at those numbers? Next, we will break down the key valuation models, showing exactly where AES shines. And if you stick around until the end, we will share one way to look at the company’s value that most investors overlook. This can give you the clearest perspective before you make your decision.

Why AES is lagging behind its peers

Approach 1: AES Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a powerful valuation tool that estimates the value of a company by forecasting its future cash flows and discounting them back to today’s dollars. This method provides a long-term perspective based on how much cash a business can actually generate for shareholders over time.

For AES, analysts currently estimate its trailing twelve month Free Cash Flow at negative $3.0 billion, reflecting significant capital investments or operating challenges. Looking forward, projections suggest a dramatic turnaround, with Free Cash Flow expected to reach $1.38 billion by 2028. It is worth noting that analysts typically provide detailed estimates up to five years into the future, and any further numbers, such as the projections stretching out to 2035, are based on extrapolations by Simply Wall St, not sell-side analyst consensus.

Based on these forecasts, the DCF model calculates an intrinsic value for AES at $19.28 per share. With the current market price trading at a 24.4% discount to this valuation, the data indicate that the stock is significantly undervalued by this measure.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AES.

Our Discounted Cash Flow (DCF) analysis suggests AES is undervalued by 24.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: AES Price vs Earnings (P/E Ratio)

The Price-to-Earnings (P/E) ratio is a favored metric for valuing profitable companies like AES. It compares the stock price to the company’s actual earnings, giving investors a snapshot of how much they are paying for each dollar of profit. P/E ratios are shaped by factors such as growth prospects and perceived risks. In general, higher expected growth or lower risk warrants a higher multiple. Companies with slower growth or more uncertainty tend to trade at lower multiples.

Currently, AES trades at a P/E ratio of 11.30x. For context, the average P/E across the Renewable Energy industry is 16.56x, while the peer group sits at a notably higher 56.73x. This places AES well below both the industry and its peers, suggesting investors may be discounting its earnings potential or seeing higher risks relative to comparables.

Simply Wall St’s proprietary Fair Ratio takes the comparison a step further by considering not just the industry and peers, but also specifics of AES’s growth outlook, profit margins, market capitalization, and risk. In this case, the Fair Ratio for AES is 30.15x, a level that is more tailored and accounts for nuances that benchmarks alone cannot capture.

Since AES’s current P/E of 11.30x is significantly lower than its Fair Ratio of 30.15x, it suggests the stock is undervalued by this method, even more so than simple industry or peer comparisons indicate.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your AES Narrative

Earlier, we mentioned there is an even better way to understand valuation. Let us introduce Narratives, a smarter tool available on Simply Wall St’s platform that links your outlook on a company’s future to a custom financial forecast and a Fair Value calculation.

A Narrative is your personal investment story, where you connect what you believe about AES’s business strategy, growth, and risks to assumptions about its future revenue, earnings, and profit margins. This isn’t just about numbers; it is about the reason behind your forecast, bringing together your perspective on where the company is heading with a fair value estimate tailored to your own insights.

Using Narratives is simple and accessible for everyone. Millions of investors are already creating and sharing them in the Simply Wall St Community page with just a few clicks. Narratives help you decide when to buy or sell by comparing your calculated Fair Value against the current market Price. They automatically update as new news or earnings data is released, so your view stays relevant.

For example, on AES, one investor’s optimistic Narrative might set a Fair Value as high as $23.00 per share based on strong renewables growth. Another, more cautious view might see a Fair Value closer to $5.00 due to concerns over regulatory and supply chain risks. This illustrates how Narratives turn opinions into actionable numbers.

Do you think there's more to the story for AES? Create your own Narrative to let the Community know!

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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