Editor's Note: 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.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+ . The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, increase in net income, notable return on equity and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the Electric Utilities industry average, but is less than that of the S&P 500. The net income increased by 2.8% when compared to the same quarter one year prior, going from $352.00 million to $362.00 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, AMERICAN ELECTRIC POWER CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- AEP, with its decline in revenue, slightly underperformed the industry average of 0.8%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- AMERICAN ELECTRIC POWER CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, AMERICAN ELECTRIC POWER CO increased its bottom line by earning $3.24 versus $2.53 in the prior year. For the next year, the market is expecting a contraction of 5.9% in earnings ($3.05 versus $3.24).
American Electric Power Company, Inc., a public utility holding company, engages in the generation, transmission, and distribution of electric power to retail customers. It generates electricity using coal and lignite, natural gas, nuclear energy, and hydroelectric energy. The company has a P/E ratio of 12.8, above the average utilities industry P/E ratio of 10.6 and below the S&P 500 P/E ratio of 17.7. American Electric has a market cap of $21.03 billion and is part of the
industry. Shares are up 3.6% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.