Are Investors Undervaluing AES (AES) Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is AES (AES). AES is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 5.74 right now. For comparison, its industry sports an average P/E of 15.28. Over the past 52 weeks, AES's Forward P/E has been as high as 10.04 and as low as 4.38, with a median of 5.79.

We also note that AES holds a PEG ratio of 0.51. 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 PEG compares to its industry's average PEG of 1.28. Over the past 52 weeks, AES's PEG has been as high as 1.89 and as low as 0.51, with a median of 1.41.

We should also highlight that AES has a P/B ratio of 1.21. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. AES's current P/B looks attractive when compared to its industry's average P/B of 2.47. Over the past year, AES's P/B has been as high as 2.03 and as low as 0.89, with a median of 1.18.

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 0.82. This compares to its industry's average P/S of 2.21.

Finally, our model also underscores that AES has a P/CF ratio of 4.12. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 11.88. Over the past year, AES's P/CF has been as high as 7.00 and as low as 2.41, with a median of 3.49.

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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This article originally published on Zacks Investment Research (zacks.com).

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