The AES Corporation (NYSE: AES) and FirstEnergy Corporation (NYSE:FE) are both mid-cap utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, dividends, institutional ownership, profitability and earnings.

Profitability

This table compares The AES Corporation and FirstEnergy Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The AES Corporation -5.30% 15.86% 2.57%
FirstEnergy Corporation -35.59% 15.41% 2.56%

Volatility and Risk

The AES Corporation has a beta of 1.21, indicating that its share price is 21% more volatile than the S&P 500. Comparatively, FirstEnergy Corporation has a beta of 0.18, indicating that its share price is 82% less volatile than the S&P 500.

Valuation and Earnings

This table compares The AES Corporation and FirstEnergy Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
The AES Corporation $14.05 billion 0.54 $3.58 billion ($1.14) -10.03
FirstEnergy Corporation $13.76 billion 1.06 $3.96 billion ($11.70) -2.79

FirstEnergy Corporation has higher revenue, but lower earnings than The AES Corporation. The AES Corporation is trading at a lower price-to-earnings ratio than FirstEnergy Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations for The AES Corporation and FirstEnergy Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The AES Corporation 1 4 0 0 1.80
FirstEnergy Corporation 0 10 3 0 2.23

The AES Corporation presently has a consensus target price of $12.00, suggesting a potential upside of 4.99%. FirstEnergy Corporation has a consensus target price of $33.75, suggesting a potential upside of 3.24%. Given The AES Corporation’s higher possible upside, analysts clearly believe The AES Corporation is more favorable than FirstEnergy Corporation.

Institutional & Insider Ownership

93.5% of The AES Corporation shares are held by institutional investors. Comparatively, 78.8% of FirstEnergy Corporation shares are held by institutional investors. 1.1% of The AES Corporation shares are held by company insiders. Comparatively, 0.3% of FirstEnergy Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

The AES Corporation pays an annual dividend of $0.48 per share and has a dividend yield of 4.2%. FirstEnergy Corporation pays an annual dividend of $1.44 per share and has a dividend yield of 4.4%. The AES Corporation pays out -42.1% of its earnings in the form of a dividend. FirstEnergy Corporation pays out -12.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. FirstEnergy Corporation has increased its dividend for 4 consecutive years. FirstEnergy Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

The AES Corporation beats FirstEnergy Corporation on 10 of the 16 factors compared between the two stocks.

The AES Corporation Company Profile

The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.

FirstEnergy Corporation Company Profile

FirstEnergy Corp. is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries. Its segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other. As of December 31, 2016, the Regulated Distribution segment distributed electricity through the Company’s 10 utility operating companies, serving approximately six million customers, and purchased power for its provider of last resort (POLR), standard offer service (SOS), standard offer service (SSO) and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). The CES segment primarily supplies electricity to end use customers through retail and wholesale arrangements.

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