AES - Embedded Expectations Analysis - 2019 02 08
The AES Corporation (AES:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Earnings, with a 26.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about energy contracts, third-party financing, sPower divestiture returns, and dividend growthSpecifically, management may have concerns about their energy contracts in Chile, Mexico, and Hawaii, as well as their ability to handle shutdowns caused by lightning strikes in the Dominican Republic. Furthermore, they may be concerned about their ability to grow through third-party financing and sustain dividend growth. Moreover, they may be concerned about their ability to sustain return on invested capital growth, and offset lost net income, following the sale of their position in sPower. Finally, they may lack confidence in their ability to profit from long-term contract agreements and may be overstating the demand for gas in Vietnam
AES is a holding company. Through its subsidiaries, the company operates a portfolio of electricity generation and distribution businesses. The first business line is generation, where the company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries. The second business line is utilities, where the company owns and/or operates utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors within a defined service area. In certain circumstances, the company's utilities also generates and sells electricity on the wholesale market.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.