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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
American Electric Power Company, Inc. (XNAS:AEP) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
AEP
Name:
AMERICAN ELECTRIC POWER COMPANY, INC. (XNAS:AEP)
Sector:
1.62B
Industry:
Utilities�Regulated Electric
CEO:
Mr. Nicholas Akins
Total Employees:
16,688
Our Technological Advancement Rating
Our Rating:
B
Technological advancement compared to industry is -1.25% lower
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF AMERICAN ELECTRIC POWER COMPANY, INC.(AEP) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND UTILITIES�REGULATED ELECTRIC INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
101.09
One Month Price Target:
$101.29
Six Month Price Target :
$102.27
Likely Price in One Year's Time:
Ticker:
$103.45
Likely Trading Range Today Under (Normal Volatility)
$100.82
Price Upper limit ($) :
$101.41
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$97.54
This week:
$93.15
This month :
$85.21
Other Primary facts
Market Cap:
52.17B
Market Cap Classification:
Large Cap
Number of Shares
IPO Date:
513.73M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
11.68%
-11.58%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$117.57
$110.01
$84.61
$92.17
Medium risk (<10%) entry points
Buy Call
Sell Call
$107.55
Buy Put:
Sell Put:
$105.94
$94.60
$96.24
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
AEP
Sharpe Ratio:
1.13%
Comparison:
AEP, is amongst the top 60% stocks with highest risk-adjusted returns
Sharpe ratio is -3.48% lower than the industry
& is -50.39% lower than the market/S&P 500 average
Average Returns/Yield of
AEP
Daily returns:
0.03%
Weekly returns:
0.14%
Monthly returns:
0.57%
Yearly returns:
7.85%
Comparison of returns:
Average annual returns/yield (last 3 years) is -13.31% below industry average
Classification:
AEP, is amongst the top 60% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.87
Statistical test of Returns:
AEP has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
1.72%
Weekly Volatility:
3.86%
Monthly Volatility:
7.71%
Yearly Volatility:
26.71%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
1.75%
Volatility in last five trading days has been 1.58% above long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-3.51%
Weekly VaR:
-7.85%
Monthly VaR:
-15.71%
How Much Can the price of
AEP
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-14%
Worst case (decline):
-54.42%
This translates to price declining to:
$87.37
This translates to price declining to:
$46.08
Severe Crash Probability
Risk of crash in next 6/12 months: Medium (<50%)
What is Value at Risk (VaR)?
Risk Fundamentals
AEP is a 10.88% riskier investment compared to the market/S&P 500 & is -5.01% less risky than Nasdaq(IXIC)
Risk (measured by volatility) is -15.03% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
AEP
Beta in relation to market/S&P 500--0.35
Expected beta in 1 year's time:
0.462
Expected beta in 3 year's time:
0.653
Unlevered (debt free) Beta:
0.001
Beta in relation to Nasdaq (XNAS):
0.391
Beta in relation to all global stocks::
0.556
Beta Comparison & Analysis
Beta of competitors/peers::
0.553
Beta is -37.10% lower than peers
Average Industry Beta:
0.5
Beta is -30.37% below industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
4.04%
Sustainable growth rate is 15.83% above industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.013
Alpha is -0.40% below industry average alpha yield
Alpha is 81% compared to market & is healthy
Analysis of Cost of Capital of
AEP
Equity cost of capital:
0.055
Equity cost of capital is -15.81% below industry mean WACC
Unlevered (without debt) cost of capital:
0.01%
Before-tax cost of debt:
3.29%
After-tax cost of debt:
2.60%
Overall debt rating:
High AA grade (second highest grade)
Weighted average cost of capital (WACC):
2.60%
WACC is -17.74% below industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$33.29
Revenue growth rate per share of (3Y):
2.16
Annual revenue growth rate is -354.15% below industry average
EPS:
$5.21
Expected Annual growth rate of EPS (3Y):
8.44%
Expected future EPS growth rate is -236.42% lower than the Utilities�Regulated Electric industry
Free cash flow (FCF) per share:
$2.67
Balance sheet equity growth per share: 20.31%
Equity growth rate per share is 246.09% higher than the industry
Debt per share
$61.16
EBITDA per share
$13.73
Valuation Analysis Today of
AEP
P/E Ratio:
19.92
P/E Ratio of Competitors/Peers:
42.04
P/E ratio is -52.63% lower than main peers & is -28.07% lower than the industry
Stock price/value with industry average P/E ratio: $144.26
AEP is -29.92% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $103.66
Present value of the expected future dividends only: $70.41
P/S (Price to Sales ratio):
3.04
Price to sales ratio is 4.60% above the industry mean
P/B (Price to book value ratio):
2.16
Price to free cash flow: 37.93
Price to free cash flow ratio is 53.61% higher than the industry
Net income growth rate (3Y):
28.56%
Net income growth rate is -1069.76% lower than the industry average net income growth rate
Dividend Analysis
Dividend payout rate: 15.16%
Dividend yeild: 3.05%
Previous Dividend: $0.78
Previous adjusted dividend: $0.78
Previous Dividend: $3.08
Expected next dividend best case: $0.81
Expected next dividend worst case: $0.75
Average dividend payment (long-term): $0.74
Average dividend increase/decrease (growth rate) % per period: 1.11%
Expected next dividend payment date: 09/08/2022
Expected next dividend record date: 08/08/2022
Expected next dividend declaration date: 25/07/2022
Previous dividend payment date: 06/10/2022
Previous dividend record date: 05/10/2022
Previous dividend declaration date: 26/04/2022
Dividend History:
2022-05-09--$0.78
2021-11-09--$0.78
2021-05-07--$0.74
2022-02-09--$0.78
2021-08-09--$0.74
2021-02-09--$0.74
Dividend growth rate is -211.01% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
57021.78%
Net debt to equity ratio:
66201.63%
Debt to assets ratio:
34.98%
Net debt to assets ratio:
40.61%
Debt-to-asset ratio is -44.35% below industry average
Ability to repay debt:
Interest coverage ratio:
5.77
Interest coverage ratio is 124.15% more than industry average
Looking forward:
Debt growth rate:
6.47%
Annual debt growth is -86% lower than industry average debt growth rate
Debt repayment rate in last quarter: 0.05%
Analysis of Key Statistics
Correlation of price movement with the market:
0.557
Statistical significance of correlation:
AEP has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.597
Stock price is -6.66% less correlated with the market compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.597
Correlation of price movement with Nasdaq (^IXIC):
0.055
Covariance of price movement with the market:
0.056
Kurtosis
11.572
Returns have a significant fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are more probable, compared to assets with normally distributed returns
Skewness of returns:
0.01
Returns are, approximately, symmetrical
Fundamental Analysis & Dupont Analysis of
AEP
Gross Profit Margin Ratio:
253%
Operating Profit Margin Ratio:
20.98%
Operating profit margin is 80.36% higher than the industry
Net Profit Margin Ratio:
253%
Effective Tax Rate:
4.27%
Effective tax rate is -78.77% lower than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
4775.32%
Return on equity (ROE) is 52431.18% higher than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
2.93%
Return on assets (ROA) is 26.67% higher than the industry
Financial Leverage:
1.5x
Current Ratio:
0.61
Current ratio is -74.54% below industry average
Cash Conversion Cycle (days):
-125.2
Cash conversion cycle is -232.56% below industry average
The remaining useful life of property plant & equipment is: 2.8 years
Stock based compensation to net income ratio:
-
In-depth Efficiency Analysis
Revenue generated per employee:
1.0M
Each employee generates -63% less revenue than industry average revenue per employee
EBITDA generated per employee:
422.7K
Each employee generates -64% less EBITDA than industry average revenue per employee
Profit generated per employee:
157.7K
Each employee generates -61% less net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
97.2K
Each employee generates -395% less free cash flow than industry average revenue per employee
Assets/Capital per employee
4.9M
Each employee generates -395% less free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
AEP
SEMPRA ENERGY (XNYS:SRE)
NATIONAL GRID PLC (XNYS:NGG)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED (XNYS:PEG)
Eversource Energy (XNYS:ES)
WEC ENERGY GROUP, INC. (XNYS:WEC)
CONSOLIDATED EDISON, INC. (XNYS:ED)
DOMINION ENERGY SRS A UNT (XNYS:DCUE)
PG&E CORPORATION (XNYS:PCG)
-
Current Analyst Ratings
Strong buy�17%
Buy�8%
Hold�46%
Sell�0%
Strong sell�0%
Overall analyst sentiment is: Hold
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
17.10B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
6.25B
10.85B
-
-
-
-
7.25B
7.25B
-
1.22B
3.09B
7.05B
3.59B
2.63B
2.66B
113.80M
2.63B
Statement of Cash Flow
Date:
Period:
792.40M
Differed Income Tax :
- 17700.00K
Stock Based Compensation :
-
Change in Working Capital :
129.40M
Accounts Receivables:
- 24300.00K
Other Working Capital:
-
Other Non-Cash Items:
-
Net Cash Provided by Operating Activities:
1.62B
Investments in PP&E:
- 31100.00K
Net Acquisitions:
-
Purchases of Investments:
- 508500.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
675.60M
208.50M
884.10M
990.20M
696.40M
5.70B
8.27B
68.52B
52.50M
-
-
-
12.99B
81.56B
-
89.83B
1.69B
5.73B
-
356.20M
5.78B
13.57B
31.42B
12.43B
52.17B
-
65.74B
-
11.99B
430.6M
-
March 31, 2022 at 6:00:00 AM
13.50B
55.10M
65.79B
-
37.15B
36.5B
497.40M
- 2851000.00K
- 2893200.00K
- 14700.00K
809.50M
-
- 398800.00K
1.15B
1.55B
-
274.10M
725.50M
451.40M
1.62B
- 31100.00K
1.62B
Our Proprietary Portfolio Rating
Our Rating:
B
Price Forecast/Expected Price in Next 5 Years of
AEP
2023
2024
2025
2026
2027
$103.97
$155.72
$159.36
$163.08
$166.90