NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strongest point has been its strong cash flow from operations. At the same time, however, we also find weaknesses including generally poor debt management, disappointing return on equity and poor profit margins.
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Highlights from the ratings report include:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, AES CORP's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for AES CORP is rather low; currently it is at 24.80%. It has decreased from the same quarter the previous year.
The AES Corporation, a power company, operates a portfolio of electricity generation and distribution businesses. Its Generation business owns and/or operates power plants to generate and sell power to wholesale customers, such as utilities and other intermediaries. The company has a P/E ratio of 16.8, below the average utilities industry P/E ratio of 55.7 and below the S&P 500 P/E ratio of 17.7. AES has a market cap of $9.4 billion and is part of the
industry. Shares are up 3.5% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.