With a market cap of $7.38 billion, The AES Corp. (AES, Financial) is the world's largest independent power producer.
Principal metrics
Revenue grew 6.7% to $3.49 billion. This growth does not help the company's bottom line, having a decline in earnings per share. As shown in the table below, the company has reported a trend of declining EPS over the past several quarters. During the past fiscal year, AES reported lower earnings of $0 versus 48 cents in the previous year. This year, the street expects an increase in earnings to $1.05 from $0.
Table EPS and Revenues per quarter:
| Earnings per share | Revenues |
| Q1 2017 EPS of 17 cents missed by three cents | Revenue of $3.49 billion (up 6.7%) beat by $270 million |
| Q4 2016 EPS of 35 cents missed by one cent | Revenue of $3.54 billion (up 7.6%) missed by $1.75 billion |
| Q3 2016 EPS of 32 cents missed by one cent | Revenue of $3.54billion (up 0.6%) missed by $840 million |
| Q2 2016 EPS of 17 cents beat by one cent | Revenue of $3.23 billion (down 11.7%) missed by $450 million |
The operating margin is considered relatively low at 15.44% and has been in a five-year decline.
The debt-equity ratio is higher than the industry average. Further, the quick ratio of less than 1.0 can cause cash problems in the short term.
Finally, the return on equity has decreased, signaling management´s weakness. Compared to other companies in the industry and overall market, the company's return on equity is lower.
Relative valuation
In terms of valuation, the stock is trading at a trailing price-earnings (P/E) ratio of-5.75 times, a discount compared to an average of 20.5 times for the industry. To use another metric, its price-book (P/B) ratio of 2.47 times indicates a premium versus the industry average of 1.62 times (which is close to a one-year low), while the price-sales (P/S) ratio of 0.53 times is below the industry average of 1.69 times.
Price performance
The stock price is down 10% in the last 12 months, down 3% in the past quarter and down 3.1% in the past month. The chart below shows the stock price has a volatile trend over the five-year period.
Dividend growth
The company is committed to returning cash to investors in the form of dividends as it generates strong cash flows. Looking at the cash flow statement, we see cash flow from operating activities at the end of 2014 to 2016 was $2.88 billion, $2.13 billion and $1.79 billion. Dividends have been paid since 2012. In July, the board of directors declared a quarterly dividend of 12 cents per share, which is payable in August. The current dividend yield is 4.37%, which is attractive enough compared to the S&P 500.
Final comment
AES produces and distributes electricity in several markets around the world. Several headwinds, including falling energy prices, a weak currency and low demand in emerging markets (mostly South American countries), have impacted the company´s growth. The problems in Argentina and Brazil are offset by Chile, a country with a strong currency and where the company has large projects planned.
Hedge fund guru Paul Tudor Jones (Trades, Portfolio) upped his stake by 9.1% in the first quarter. Caxton Associates (Trades, Portfolio) initiated a new position with a holding of 42,046 shares.
Disclosure: The author holds no position in any stocks mentioned.
