On July 21, 2023, The AES Corp (AES, Financial) reported a gain of 3.02%, with its stock price reaching $22.49. The AES, a global power company with a $15.1 billion market cap, currently operates a generation portfolio of over 32 gigawatts, including renewable energy, gas, coal, and oil. It also manages six electric utilities, supplying power to 2.6 million customers.
According to GuruFocus's unique indicator, the GF Value, The AES appears to be modestly undervalued. The GF Value is calculated based on historical trading multiples, past performance, and estimates of future business performance. When a stock's price is significantly below the GF Value Line, its future return is likely to be higher.
The AES Valuation and GF Value
The AES's stock, with its current price of $22.49 per share, is modestly undervalued according to the GF Value calculation. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength of The AES
Investing in companies with poor financial strength poses a higher risk of permanent capital loss. The AES has a cash-to-debt ratio of 0.09, which is worse than 74.85% of companies in the Utilities - Regulated industry. This indicates that the financial strength of The AES is poor.
The AES's Profitability
Investing in profitable companies poses less risk. The AES has been profitable 6 out of the past 10 years and its operating margin of 18.47% ranks better than 68.2% of companies in the Utilities - Regulated industry. However, the company reported a loss per share of $-0.82 over the past twelve months.
Growth of The AES
The average annual revenue growth of The AES is 7.3%, which ranks worse than 52.59% of companies in the Utilities - Regulated industry. The 3-year average EBITDA growth is -13.6%, ranking worse than 89.11% of companies in the same industry.
ROIC vs WACC
The AES’s return on invested capital (ROIC) of 19.51 exceeds its weighted average cost of capital (WACC) of 7.16, indicating that the company is likely creating value for its shareholders.
Conclusion
In conclusion, the stock of The AES appears to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 89.11% of companies in the Utilities - Regulated industry. To learn more about The AES stock, you can check out its 30-Year Financials here.
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