FirstEnergy Corp. – Value Analysis (NYSE:FE) : April 21, 2017

Capitalcube gives FirstEnergy Corp. a score of 13.

Our analysis is based on comparing FirstEnergy Corp. with the following peers – Consolidated Edison, Inc., Public Service Enterprise Group Inc, Exelon Corporation, American Electric Power Company, Inc., PPL Corporation, Dominion Resources, Inc., Southern Company, NextEra Energy, Inc. and NRG Energy, Inc. (ED-US, PEG-US, EXC-US, AEP-US, PPL-US, D-US, SO-US, NEE-US and NRG-US).

Investment Outlook

FirstEnergy Corp. has a fundamental score of 13 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It’s current Price/Book of 2.18 is about median in its peer group.
  • FE-US‘s EBITDA-based price multiple implies slower growth than its peers despite its current comparatively high EBITDA-based returns.
  • FE-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • FE-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • FE-US‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low Price/EBITDA ratio suggests substandard growth expectations relative to peers.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • FE-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

FE-US is debt-constrained.

  • With debt at a relatively high 62.90% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 44.09%), and interest coverage level of 2.12x, FE-US seems debt-constrained.
  • All 9 peers for the company have an outstanding debt balance.

FE-US has maintained its relatively high leverage profile from the prior year-end.

  • FE-US‘s interest coverage is similar to its four-year average interest coverage of 2.11x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (2.12x) and the peer median (3.17x).
  • FE-US‘s debt-EV is similar to last year’s high of 62.93%, which compares to the 2013 low of 52.90%.
  • Though its debt-EV has remained relatively stable at 62.90% compared to 2015, its peer median has increased to 44.09% from 43.48% during this period.
  • Relative to peers, debt-EV fell 0.63 percentage points.

Access the detailed analysis for FirstEnergy Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Consolidated Edison, Inc. 42.17 0.89 3.81 20.76
Public Service Enterprise Group Inc 35.33 0.99 3.43 30.87
Exelon Corporation 52.29 0.92 2.69 28.69
American Electric Power Company, Inc. 42.33 0.64 3.6 22.88
PPL Corporation 45.84 0.54 3.43 17.66
Dominion Resources, Inc. 41.27 0.52 2.92 14.41
Southern Company 49.27 0.75 4.03 10.27
NextEra Energy, Inc. 36.18 0.68 2.53 21.67
NRG Energy, Inc. 87.14 1.46 1.25 11.1
FirstEnergy Corp. 62.9 0.41 2.12 14.27
Peer Median 44.09 0.72 3.17 19.21
Best In Class 35.33 1.46 4.03 30.87

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Company Profile

FirstEnergy Corp. operates as a diversified energy company. It engages in the generation, transmission, and distribution of electricity, as well as energy management and other energy-related services through its subsidiaries. It operates through the following segments: Regulated Distribution, Regulated Transmission, and Competitive Energy Services (CES). The Regulated Distribution segment distributes electricity through FirstEnergy’s utility operating companies, serving various customers within Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by FirstEnergy’s utilities and the regulatory assets. The CES segment supplies electricity to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and Maryland, and the provision of partial POLR and default service for some utilities in Ohio, Pennsylvania and Maryland, including the utilities. The company was founded in 1996 and is headquartered in Akron, OH.


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