Critical Survey: American Electric Power (NASDAQ:AEP) and Atlantica Sustainable Infrastructure (NASDAQ:AY)


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American Electric Power (NASDAQ:AEP) and Atlantica Sustainable Infrastructure (NASDAQ:AY) are both utilities companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, dividends, analyst recommendations, risk, profitability and earnings.

Risk & Volatility

American Electric Power has a beta of 0.22, meaning that its share price is 78% less volatile than the S&P 500. Comparatively, Atlantica Sustainable Infrastructure has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500.

Valuation and Earnings

This table compares American Electric Power and Atlantica Sustainable Infrastructure’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Electric Power $15.56 billion 2.49 $1.92 billion $4.24 18.43
Atlantica Sustainable Infrastructure $1.01 billion 4.55 $62.13 million $0.61 74.25

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

Dividends

American Electric Power pays an annual dividend of $2.96 per share and has a dividend yield of 3.8%. Atlantica Sustainable Infrastructure pays an annual dividend of $1.68 per share and has a dividend yield of 3.7%. American Electric Power pays out 69.8% of its earnings in the form of a dividend. Atlantica Sustainable Infrastructure pays out 275.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Atlantica Sustainable Infrastructure has raised its dividend for 3 consecutive years. American Electric Power is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

Net Margins Return on Equity Return on Assets
American Electric Power 12.82% 10.19% 2.66%
Atlantica Sustainable Infrastructure 6.37% 3.86% 0.64%

Insider and Institutional Ownership

75.0% of American Electric Power shares are held by institutional investors. Comparatively, 37.8% of Atlantica Sustainable Infrastructure shares are held by institutional investors. 0.2% of American Electric Power shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for American Electric Power and Atlantica Sustainable Infrastructure, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Electric Power 0 5 10 0 2.67
Atlantica Sustainable Infrastructure 0 2 4 0 2.67

American Electric Power presently has a consensus target price of $95.50, suggesting a potential upside of 22.20%. Atlantica Sustainable Infrastructure has a consensus target price of $37.00, suggesting a potential downside of 18.30%. Given American Electric Power’s higher probable upside, equities research analysts clearly believe American Electric Power is more favorable than Atlantica Sustainable Infrastructure.

Summary

American Electric Power beats Atlantica Sustainable Infrastructure on 12 of the 16 factors compared between the two stocks.

American Electric Power Company Profile

American Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. It operates through Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing segments. The company generates electricity using coal and lignite, natural gas, nuclear, and hydroelectric, as well as solar, wind, and other energy sources. It also supplies and markets electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants. The company owns, leases, or controls approximately 4,004 railcars, 468 barges, 8 towboats, and a coal handling terminal with approximately 18 million tons of annual capacity. American Electric Power Company, Inc. was founded in 1906 and is headquartered in Columbus, Ohio.

Atlantica Sustainable Infrastructure Company Profile

Atlantica Sustainable Infrastructure plc acquires, owns, and manages renewable energy, natural gas, transmission and transportation infrastructures, and water assets in the United States, Canada, Mexico, Peru, Chile, Uruguay, Spain, Algeria, and South Africa. It owns 25 assets comprising 1,496 MW of aggregate renewable energy installed generation capacity; 343 MW of natural gas-fired power generation capacity; 1,166 miles of electric transmission lines; and 10.5 million cubic feet per day of water desalination assets. The company was formerly known as Atlantica Yield plc and changed its name to Atlantica Sustainable Infrastructure plc in May 2020. Atlantica Sustainable Infrastructure plc was founded in 2013 and is based in Brentford, the United Kingdom.

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