Head to Head Survey: AES (AES) & MGE Energy (MGEE)

AES (NYSE: AES) and MGE Energy (NASDAQ:MGEE) are both utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, institutional ownership, valuation, dividends, analyst recommendations, earnings and profitability.

Profitability

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This table compares AES and MGE Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AES -8.77% 16.52% 2.65%
MGE Energy 17.33% 10.28% 4.26%

Valuation and Earnings

This table compares AES and MGE Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AES $10.53 billion 0.72 -$1.16 billion $1.08 10.57
MGE Energy $563.10 million 3.47 $97.60 million $2.23 25.25

MGE Energy has lower revenue, but higher earnings than AES. AES is trading at a lower price-to-earnings ratio than MGE Energy, indicating that it is currently the more affordable of the two stocks.

Dividends

AES pays an annual dividend of $0.52 per share and has a dividend yield of 4.6%. MGE Energy pays an annual dividend of $1.29 per share and has a dividend yield of 2.3%. AES pays out 48.1% of its earnings in the form of a dividend. MGE Energy pays out 57.8% 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. AES has increased its dividend for 5 consecutive years and MGE Energy has increased its dividend for 42 consecutive years. AES is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

93.4% of AES shares are held by institutional investors. Comparatively, 39.1% of MGE Energy shares are held by institutional investors. 1.2% of AES shares are held by company insiders. Comparatively, 0.2% of MGE Energy shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

AES has a beta of 1.17, meaning that its stock price is 17% more volatile than the S&P 500. Comparatively, MGE Energy has a beta of 0.3, meaning that its stock price is 70% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for AES and MGE Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AES 0 2 3 0 2.60
MGE Energy 0 1 0 0 2.00

AES currently has a consensus target price of $12.70, indicating a potential upside of 11.21%. Given AES’s stronger consensus rating and higher possible upside, research analysts clearly believe AES is more favorable than MGE Energy.

Summary

AES beats MGE Energy on 10 of the 17 factors compared between the two stocks.

AES Company Profile

The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.

MGE Energy Company Profile

MGE Energy, Inc., through its subsidiaries, operates as a public utility holding company primarily in Wisconsin. It operates through five segments: Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other. The company generates, purchases, and distributes electricity; owns or leases electric generation facilities located in Wisconsin and Iowa; and plans, constructs, operates, maintains, and expands transmission facilities to provide transmission services. It also generates electricity from coal, natural gas, and renewable energy sources, as well as purchases power under short and long-term commitments. As of December 31,, 2017, the company distributed electricity to 151,000 customers in Dane County, Wisconsin, including the City of Madison; and purchased and distributed natural gas to 158,000 customers in seven south-central and western Wisconsin counties. MGE Energy, Inc. was founded in 1855 and is based in Madison, Wisconsin.

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