Financial Survey: Westar Energy (WR) and American Electric Power (NYSE:AEP)

American Electric Power (NYSE: AEP) and Westar Energy (NYSE:WR) are both mid-cap utilities companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, profitabiliy, risk, dividends, earnings and institutional ownership.

Earnings and Valuation

This table compares American Electric Power and Westar Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Electric Power $15.95 billion 2.17 $5.11 billion $1.16 60.72
Westar Energy $2.57 billion 2.80 $1.05 billion $2.39 21.15

American Electric Power has higher revenue and earnings than Westar Energy. Westar Energy 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.

Risk & Volatility

American Electric Power has a beta of 0.3, indicating that its stock price is 70% less volatile than the S&P 500. Comparatively, Westar Energy has a beta of 0.4, indicating that its stock price is 60% less volatile than the S&P 500.

Dividends

American Electric Power pays an annual dividend of $2.36 per share and has a dividend yield of 3.4%. Westar Energy pays an annual dividend of $1.60 per share and has a dividend yield of 3.2%. American Electric Power pays out 203.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Westar Energy pays out 66.9% of its earnings in the form of a dividend. American Electric Power has increased its dividend for 4 consecutive years and Westar Energy has increased its dividend for 11 consecutive years.

Insider & Institutional Ownership

70.5% of American Electric Power shares are held by institutional investors. Comparatively, 71.9% of Westar Energy shares are held by institutional investors. 0.2% of American Electric Power shares are held by company insiders. Comparatively, 0.6% of Westar Energy shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and target prices for American Electric Power and Westar Energy, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Electric Power 0 7 7 0 2.50
Westar Energy 0 0 3 0 3.00

American Electric Power currently has a consensus target price of $71.60, suggesting a potential upside of 1.66%. Westar Energy has a consensus target price of $53.00, suggesting a potential upside of 4.83%. Given Westar Energy’s stronger consensus rating and higher possible upside, analysts plainly believe Westar Energy is more favorable than American Electric Power.

Profitability

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

Net Margins Return on Equity Return on Assets
American Electric Power 3.60% 10.33% 2.91%
Westar Energy 13.28% 8.96% 3.01%

Summary

Westar Energy beats American Electric Power on 12 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 Westar Energy

Westar Energy, Inc. is an electric utility. The Company provides electric generation, transmission and distribution services. The Company provides these services in central and northeastern Kansas, including the cities of Topeka, Lawrence, Manhattan, Salina and Hutchinson. Its subsidiary, Kansas Gas and Electric Company (KGE), provides these services in south-central and southeastern Kansas, including the city of Wichita. Both the Company and KGE conduct business using the name Westar Energy. The Company supplies electric energy at retail to customers in Kansas. The Company also supplies electric energy at wholesale to municipalities and electric cooperatives in Kansas, and has contracts for the sale or purchase of wholesale electricity with other utilities. As of December 31, 2016, it had 6,292 megawatts (MW) of generating capacity in service.

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