American Electric Power (NYSE: AEP) and Calpine (NYSE:CPN) are both mid-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, valuation and profitability.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for American Electric Power and Calpine, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Electric Power 0 7 6 0 2.46
Calpine 0 7 3 0 2.30

American Electric Power currently has a consensus target price of $74.82, suggesting a potential upside of 1.59%. Calpine has a consensus target price of $14.86, suggesting a potential downside of 1.58%. Given American Electric Power’s stronger consensus rating and higher probable upside, equities analysts clearly believe American Electric Power is more favorable than Calpine.

Valuation and Earnings

This table compares American Electric Power and Calpine’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Electric Power $16.40 billion 2.21 $610.90 million $3.83 19.23
Calpine $6.72 billion 0.81 $92.00 million ($0.07) -215.71

American Electric Power has higher revenue and earnings than Calpine. Calpine is trading at a lower price-to-earnings ratio than American Electric Power, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares American Electric Power and Calpine’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Electric Power 13.07% 12.17% 3.40%
Calpine 8.93% 28.93% 5.33%

Dividends

American Electric Power pays an annual dividend of $2.48 per share and has a dividend yield of 3.4%. Calpine does not pay a dividend. American Electric Power pays out 64.8% of its earnings in the form of a dividend. Calpine has increased its dividend for 4 consecutive years.

Risk & Volatility

American Electric Power has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500. Comparatively, Calpine has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500.

Institutional and Insider Ownership

71.0% of American Electric Power shares are held by institutional investors. Comparatively, 85.9% of Calpine shares are held by institutional investors. 0.2% of American Electric Power shares are held by insiders. Comparatively, 1.2% of Calpine shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

American Electric Power beats Calpine on 10 of the 17 factors compared between the two stocks.

American Electric Power Company Profile

American Electric Power Company, Inc. (AEP) is a public utility holding company that owns, directly or indirectly, all of the outstanding common stock of its public utility subsidiaries and varying percentages of other subsidiaries. The service areas of the Company’s public utility subsidiaries cover the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The Company’s segments include Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing. AEP’s vertically integrated utility operations are engaged in the generation, transmission and distribution of electricity for sale to retail and wholesale customers. Transmission and Distribution Utilities segment consists of the transmission and distribution of electricity for sale to retail and wholesale customers. AEP Transmission Holdco develops, constructs and operates transmission facilities.

Calpine Company Profile

Calpine Corporation is a power generation company. The Company is engaged in the ownership and operation of primarily natural gas-fired and geothermal power plants in North America. The Company’s segments include West (including geothermal), Texas and East (including Canada). In the Northeast and Mid-Atlantic regions, the Company has generating units capable of burning either natural gas or fuel oil. As of December 31, 2016, the Company’s portfolio consisted of two types of power generation technologies, including natural gas-fired combustion turbines, such as combined-cycle plants, and renewable geothermal conventional steam turbines. As of December 31, 2016, the Company’s portfolio included 80 power plants, including one under construction, with an aggregate generation capacity of 25,908 Megawatt (MW) and 828 MW under construction. As of December 31, 2016, it had four MW of capacity from solar power generation technology at its Vineland Solar Energy Center in New Jersey.

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