American Electric Power Company, Inc. (AEP)
Valuation Overview•Is American Electric Power Company, Inc. Overvalued or Undervalued?
Trading at a discount to intrinsic cash flow value, implying pessimistic long-term market expectations.
Moderate quality score of 48/100, reflecting stable operating margins and manageable leverage.
Wall Street forecasts a balanced outlook with consensus price targets near the current price.
Verdict: Average quality business weighed down by significant solvency concerns.
Wall Street is broadly bullish, projecting solid upside. This is paired with healthy capital returns, anchored by a strong, well-covered dividend yield.
AEP demonstrates adequate business quality with stable profitability. However, this is severely offset by a highly leveraged balance sheet (Debt/EBITDA > 4.0x) and elevated financial risk.
The company exhibits steady, low-single-digit revenue growth paired with robust earnings compounding (14.0% EPS 3Y CAGR). The company maintains healthy operational efficiency with a 23.5% operating margin.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $6.0B | +9.4% | +4.1% | +7.9% | +2.9% | |
| EBITDA | $2.3B | — | +9.5% | — | — | |
| Net Income | $874.0M | +20.7% | +15.8% | — | +5.7% | |
| EPS (Diluted) | $1.60 | +19.4% | +14.0% | +8.5% | +4.8% | |
| Free Cash Flow | -$1.3B | -174.4% | -13.6% | +2.6% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 40.4% | 30.9% | 29.2% | 28.0% |
| Operating Margin | 23.5% | 23.2% | 21.4% | 20.4% |
| Net Margin | 16.5% | 14.2% | 13.9% | 12.5% |
| FCF Margin | 3.8% | -8.9% | -9.2% | -9.4% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $1.57 | $1.64 | +4.5% | ||
| Q1'26 | $1.15 | $1.19 | +3.5% | ||
| Q4'25 | $1.81 | $1.80 | -0.6% | ||
| Q3'25 | $1.27 | $1.43 | +12.6% | ||
| Q2'25 | $1.40 | $1.54 | +10.0% | ||
| Q1'25 | $1.25 | $1.24 | -0.8% | ||
| Q4'24 | $1.80 | $1.85 | +2.8% | ||
| Q3'24 | $1.23 | $1.25 | +1.6% |
Total return is +29.9% (1Y), outperforming the benchmark by +4.9%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +11.9% | +2.6% | — |
| 1Y | +29.9% | +4.9% | +3.7% |
| 3YCAGR | +17.9% | -1.5% | +12.9% |
| 5YCAGR | +12.0% | -1.0% | +21.0% |
| 10YCAGR | +9.0% | -4.7% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about American Electric Power Company, Inc. (AEP) valuation, health, and returns.
American Electric Power Company, Inc. is estimated to be undervalued under our discounted cash flow framework. relative multiples indicate the stock is Fair versus peers compared to industry peers. undervalued (implying +24.1% upside to DCF intrinsic value of $158.47)
American Electric Power Company, Inc. has multiple valuation anchors: DCF Intrinsic Value: $158.47 | Peer Relative Fair Value: $128.41 | Wall Street Analyst Target: $139.60 (implying +9.3% upside). A convergence of these signals offers higher conviction.
American Electric Power Company, Inc. displays fair financial health with a composite quality score of 48/100, supported by a Piotroski F-Score of 7/9, Return on Invested Capital (ROIC) of 5.1%.
American Electric Power Company, Inc. pays a 3.0% dividend yield, covered by a 56% payout ratio with 16 years of growth, supplemented by a 0.0% buyback yield.
American Electric Power Company, Inc.'s current growth trajectory is Accelerating. The company achieved +9.4% 1Y revenue growth and +19.4% 1Y EPS growth, compared to its 3Y revenue CAGR of +4.1%.
Wall Street consensus is Buy based on 36 analysts, beating EPS expectations in 75% of recent quarters with a 2-quarter streak. The consensus price target represents a +9.3% change from current levels.
Investment risks for American Electric Power Company, Inc. include: -9.7% 1-year max drawdown. Volatility risk is characterized by a beta of 0.04x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.