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Should Value Investors Buy AES (AES) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is AES (AES). AES is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 9.76, which compares to its industry's average of 15.41. Over the last 12 months, AES's Forward P/E has been as high as 14.98 and as low as 6.52, with a median of 12.06.

We also note that AES holds a PEG ratio of 1.26. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AES's industry currently sports an average PEG of 2.36. AES's PEG has been as high as 1.64 and as low as 0.74, with a median of 1.44, all within the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AES has a P/S ratio of 0.86. This compares to its industry's average P/S of 1.85.

Finally, investors should note that AES has a P/CF ratio of 7.05. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 7.58. AES's P/CF has been as high as 10.36 and as low as 4.71, with a median of 7.51, all within the past year.

These are only a few of the key metrics included in AES's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, AES looks like an impressive value stock at the moment.


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