NYSE:ALE

Stock Analysis Report

Executive Summary

ALLETE, Inc. operates as an energy company.

Rewards

Trading at 87.6% below its fair value

Earnings are forecast to grow 5.77% per year

Earnings grew by 27.6% over the past year

Pays a high and reliable dividend of 2.89%

Risk Analysis

Debt is not well covered by operating cash flow



Snowflake Analysis

Solid track record established dividend payer.


Similar Companies

Share Price & News

How has ALLETE's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ALE has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

2.6%

ALE

4.0%

US Electric Utilities

1.7%

US Market


1 Year Return

11.0%

ALE

27.2%

US Electric Utilities

23.6%

US Market

Return vs Industry: ALE underperformed the US Electric Utilities industry which returned 24.9% over the past year.

Return vs Market: ALE underperformed the US Market which returned 24.7% over the past year.


Shareholder returns

ALEIndustryMarket
7 Day2.6%4.0%1.7%
30 Day2.1%3.6%3.5%
90 Day-4.0%5.5%11.7%
1 Year14.3%11.0%31.5%27.2%26.2%23.6%
3 Year46.9%34.4%52.7%37.7%53.2%43.3%
5 Year67.5%42.2%62.1%34.8%75.5%56.1%

Price Volatility Vs. Market

How volatile is ALLETE's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is ALLETE undervalued compared to its fair value and its price relative to the market?

>50%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: ALE ($81.23) is trading below our estimate of fair value ($655.36)

Significantly Below Fair Value: ALE is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: ALE is good value based on its PE Ratio (21.2x) compared to the Electric Utilities industry average (25x).

PE vs Market: ALE is poor value based on its PE Ratio (21.2x) compared to the US market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: ALE is poor value based on its PEG Ratio (3.7x)


Price to Book Ratio

PB vs Industry: ALE is good value based on its PB Ratio (1.9x) compared to the US Electric Utilities industry average (2.3x).


Next Steps

Future Growth

How is ALLETE forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

5.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ALE's forecast earnings growth (5.8% per year) is above the savings rate (1.7%).

Earnings vs Market: ALE's earnings (5.8% per year) are forecast to grow slower than the US market (14.3% per year).

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

Revenue vs Market: ALE's revenue (3.1% per year) is forecast to grow slower than the US market (7.5% per year).

High Growth Revenue: ALE's revenue (3.1% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ALE's Return on Equity is forecast to be low in 3 years time (8.9%).


Next Steps

Past Performance

How has ALLETE performed over the past 5 years?

8.3%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: ALE has high quality earnings.

Growing Profit Margin: ALE's current net profit margins (14.2%) are higher than last year (11.1%).


Past Earnings Growth Analysis

Earnings Trend: ALE's earnings have grown by 8.3% per year over the past 5 years.

Accelerating Growth: ALE's earnings growth over the past year (27.6%) exceeds its 5-year average (8.3% per year).

Earnings vs Industry: ALE earnings growth over the past year (27.6%) exceeded the Electric Utilities industry 2%.


Return on Equity

High ROE: ALE's Return on Equity (8.9%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is ALLETE's financial position?


Financial Position Analysis

Short Term Liabilities: ALE's short term assets ($296.1M) do not cover its short term liabilities ($483.3M).

Long Term Liabilities: ALE's short term assets ($296.1M) do not cover its long term liabilities ($2.6B).


Debt to Equity History and Analysis

Debt Level: ALE's debt to equity ratio (73.3%) is considered high.

Reducing Debt: ALE's debt to equity ratio has reduced from 89.9% to 73.3% over the past 5 years.

Debt Coverage: ALE's debt is not well covered by operating cash flow (19.3%).

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


Balance Sheet

Inventory Level: ALE has a high level of physical assets or inventory.

Debt Coverage by Assets: ALE's debt is not covered by short term assets (assets are 0.2x debt).


Next Steps

Dividend

What is ALLETE's current dividend yield, its reliability and sustainability?

2.81%

Current Dividend Yield


Dividend Yield vs Market

company2.8%marketbottom25%1.4%markettop25%3.7%industryaverage3.0%forecastin3Years3.0%

Current dividend yield vs market & industry

Notable Dividend: ALE's dividend (2.89%) is higher than the bottom 25% of dividend payers in the US market (1.4%).

High Dividend: ALE's dividend (2.89%) is low compared to the top 25% of dividend payers in the US market (3.66%).


Stability and Growth of Payments

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

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


Current Payout to Shareholders

Dividend Coverage: With its reasonable payout ratio (60.7%), ALE's dividend payments are covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: ALE's dividends in 3 years are forecast to be covered by earnings (60.3% payout ratio).


Next Steps

Management

What is the CEO of ALLETE's salary, the management and board of directors tenure and is there insider trading?

3.1yrs

Average management tenure


CEO

Al Hodnik (59yo)

9.7yrs

Tenure

US$3,493,458

Compensation

Mr. Alan R. Hodnik, also known as Al, has been the Chairman of the Board of ALLETE, Inc. since May 10, 2011, serves as the Chief Executive Officer since May 1, 2010 and served as its President from May 1,  ...


CEO Compensation Analysis

Compensation vs Market: Al's total compensation ($USD3.49M) is about average for companies of similar size in the US market ($USD4.95M).

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


Management Age and Tenure

3.1yrs

Average Tenure

55yo

Average Age

Experienced Management: ALE's management team is considered experienced (3.1 years average tenure).


Board Age and Tenure

8.7yrs

Average Tenure

62.5yo

Average Age

Experienced Board: ALE's board of directors are considered experienced (8.7 years average tenure).


Insider Trading

Insider Buying: ALE insiders have only sold shares in the past 3 months.


Recent Insider Transactions

SellUS$95,34022 Nov 19
Madeleine Ludlow
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares1,200
Max PriceUS$79.45
SellUS$60,29222 May 19
Kathryn Dindo
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares735
Max PriceUS$82.03
SellUS$237,86820 May 19
Robert Adams
EntityIndividual
Role
Chief Financial Officer
Senior VP & CFO
Shares2,885
Max PriceUS$82.45
SellUS$165,02508 May 19
Madeleine Ludlow
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares2,000
Max PriceUS$82.53

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Pat Cutshall (54yo)

    VP & Corporate Treasurer

    • Tenure: 4yrs
  • Bob Adams (56yo)

    Senior VP & CFO

    • Tenure: 2.8yrs
    • Compensation: US$1.21m
  • Wade Boeshans

    President & GM of BNI Energy

    • Tenure: 7yrs
  • Al Rudeck

    President of Allete Clean Energy

    • Tenure: 3.5yrs
  • Steve Morris (57yo)

    VP, Controller & Chief Accounting Officer

    • Tenure: 3.1yrs
  • Al Hodnik (59yo)

    Chairman & CEO

    • Tenure: 9.7yrs
    • Compensation: US$3.49m
  • Bethany Owen (53yo)

    President & Director

    • Compensation: US$851.94k
  • Vince Meyer

    Vice President of Investor Relations

    • Nicole Johnson

      VP & Chief Administrative Officer

      • Tenure: 1yrs
    • Margaret Thickens (52yo)

      Vice President

      • Tenure: 0.9yrs

    Board Members

    • Heidi Jimmerson (62yo)

      Lead Director

      • Tenure: 5.7yrs
      • Compensation: US$164.00k
    • Kitty Dindo (70yo)

      Independent Director

      • Tenure: 10.5yrs
      • Compensation: US$158.00k
    • Madeleine Ludlow (64yo)

      Independent Director

      • Tenure: 15.3yrs
      • Compensation: US$157.33k
    • Bob Powers (64yo)

      Director

      • Tenure: 2.4yrs
      • Compensation: US$149.63k
    • Susan Nestegard (59yo)

      Director

      • Tenure: 2yrs
      • Compensation: US$179.08k
    • Douglas Neve (63yo)

      Independent Director

      • Tenure: 12.5yrs
      • Compensation: US$155.50k
    • Jim Hoolihan (66yo)

      Independent Director

      • Tenure: 13.7yrs
      • Compensation: US$153.17k
    • Al Hodnik (59yo)

      Chairman & CEO

      • Tenure: 9.7yrs
      • Compensation: US$3.49m
    • Bethany Owen (53yo)

      President & Director

      • Compensation: US$851.94k
    • George Goldfarb (60yo)

      Independent Director

      • Tenure: 7.3yrs
      • Compensation: US$148.00k

    Company Information

    ALLETE, Inc.'s company bio, employee growth, exchange listings and data sources


    Key Information

    • Name: ALLETE, Inc.
    • Ticker: ALE
    • Exchange: NYSE
    • Founded: 1906
    • Industry: Electric Utilities
    • Sector: Utilities
    • Market Cap: US$4.318b
    • Shares outstanding: 51.67m
    • Website: https://www.allete.com

    Number of Employees


    Location

    • ALLETE, Inc.
    • 30 West Superior Street
    • Duluth
    • Minnesota
    • 55802
    • United States

    Listings

    TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
    ALENYSE (New York Stock Exchange)YesCommon StockUSUSDJan 1968
    AEBADB (Deutsche Boerse AG)YesCommon StockDEEURJan 1968

    Biography

    ALLETE, Inc. operates as an energy company. The company operates through three segments: Regulated Operations, ALLETE Clean Energy, and U.S. Water Services. It generates electricity from coal-fired, wind, hydroelectric, natural gas-fired, biomass co-fired, solar, and other sources. The company provides regulated utility electric, natural gas, and water services in northwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers, and 10,000 water customers, as well as regulated utility electric services in northeastern Minnesota to approximately 145,000 retail customers and 16 non-affiliated municipal customers. It also owns and maintains electric transmission assets in Wisconsin, Michigan, Minnesota, and Illinois. In addition, the company focuses on developing, acquiring, and operating clean and renewable energy projects; and owns and operates approximately 545 megawatt of wind energy generation. Further, it offers integrated water management for industry by combining chemical, equipment, engineering, and service for customized solutions to reduce water and energy usage. Additionally, the company is involved in the coal mining operations in North Dakota; and real estate investment activities in Florida. The company owns and operates 159 substations with a total capacity of 8,531 megavolt amperes. It serves taconite mining, iron concentrate, paper, pulp and wood products, pipeline, and other industries. The company was founded in 1906 and is headquartered in Duluth, Minnesota. 


    Company Analysis and Financial Data Status

    All financial data provided by Standard & Poor's Capital IQ.
    DataLast Updated (UTC time)
    Company Analysis2020/01/20 23:31
    End of Day Share Price2020/01/17 00:00
    Earnings2019/09/30
    Annual Earnings2018/12/31


    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.