AES Stock Jumped in August, But is it Doomed for a Collapse?

Investors should be wary of this energy stock

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AES Corp (NYSE:AES) is an American utility and power generation company that owns and operates power plants used to generate and sell electricity to end users and intermediaries like utilities and industrial facilities. The business is also one of the world's leading power companies, generating and distributing electric power in 15 countries and employing 10,500 people worldwide.

The security is cooling today, off 0.4% at $25.35. AES saw a 14.5% bounce in August, with support from its 10-day moving average. The stock has fallen back below here during the past few sessions, though potential support from the 20-day moving average still sits just below.

aes sept 1

Still, AES stock presents fair valuation metrics at a forward price-earnings ratio of 15.72 and a price-sales ratio of 1.45. The company also offers a decent dividend yield of 2.48% at a forward dividend of $0.63.

Despite its more than 20% quarterly lead, options traders are incredibly bearish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 5.98, which stands higher than 97% of readings from the past 12 months. This implies that puts are being picked up at a much quicker-than-usual clip. 

When you look away from the charts, however, the company’s fundamentals provide very minimal long-term security. AES holds an uninspiring balance sheet with $1.67 billion in cash and a massive $21.38 billion in total debt, which is over $4 billion more than its market cap of $17 billion. Moreover, the energy business has seen a constant decline in net income in recent years, reporting $409 million in net losses for fiscal 2021. AES also maintains a tame growth rate, with estimates predicting 5.4% revenue growth and 5.9% earnings growth for fiscal 2022. The company is also expected to generate 1.1% revenue growth and 9.3% earnings growth for fiscal 2023. In general, AES stock’s poor fundamentals means AES is far too great of a liability for investors portfolios, even at its low price.

 

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