Head to Head Analysis: American Electric Power (AEP) vs. Edison International (EIX)

American Electric Power (NYSE: AEP) and Edison International (NYSE:EIX) are both large-cap utilities companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Insider & Institutional Ownership

71.0% of American Electric Power shares are held by institutional investors. Comparatively, 81.1% of Edison International shares are held by institutional investors. 0.2% of American Electric Power shares are held by insiders. Comparatively, 0.4% of Edison International shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for American Electric Power and Edison International, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Electric Power 1 6 6 0 2.38
Edison International 1 9 5 0 2.27

American Electric Power currently has a consensus price target of $75.08, indicating a potential upside of 11.30%. Edison International has a consensus price target of $80.31, indicating a potential upside of 30.75%. Given Edison International’s higher probable upside, analysts clearly believe Edison International is more favorable than American Electric Power.

Volatility and Risk

American Electric Power has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500. Comparatively, Edison International has a beta of 0.24, suggesting that its stock price is 76% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
American Electric Power 12.21% 9.67% 2.73%
Edison International 13.18% 10.84% 2.99%

Dividends

American Electric Power pays an annual dividend of $2.48 per share and has a dividend yield of 3.7%. Edison International pays an annual dividend of $2.42 per share and has a dividend yield of 3.9%. American Electric Power pays out 64.8% of its earnings in the form of a dividend. Edison International pays out 55.3% 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. American Electric Power has increased its dividend for 5 consecutive years and Edison International has increased its dividend for 13 consecutive years. Edison International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares American Electric Power and Edison International’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 2.02 $610.90 million $3.83 17.61
Edison International $11.87 billion 1.69 $1.43 billion $4.38 14.02

Edison International has lower revenue, but higher earnings than American Electric Power. Edison International 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.

Summary

Edison International beats American Electric Power on 11 of the 17 factors compared between the two stocks.

About American Electric Power

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.

About Edison International

Edison International is the holding company of Southern California Edison Company (SCE). As of December 31, 2016, SCE, a public utility, was primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. The Company is also the parent company of Edison Energy Group, Inc. (Edison Energy Group), a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar to commercial and industrial customers. SCE’s projects include West of Devers, Mesa Substation, Alberhill System, Riverside Transmission Reliability, Eldorado-Lugo-Mohave Upgrade, Tehachapi and Coolwater-Lugo. As of December 31, 2016, the West of Devers Project consisted of upgrading and reconfiguring approximately 48 miles of existing 220 kilovolt (kV) transmission lines between the Devers, El Casco, Vista and San Bernardino substations.

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