Eversource Energy (NYSE:ES) and Public Service Enterprise Group Incorporated (NYSE:PEG) are both Utilities companies that recently hit new low. Naturally, this has caught the attention of the investment community. But which is the better investment? To answer this question, we will compare the two companies across various metrics including growth, profitability, risk, return, dividends, and valuation.
Eversource Energy (NYSE:ES) operates in the Diversified Utilities segment of the Utilities sector. The company has grown sales at a 11.30% annual rate over the past five years, putting it in the high growth category. ES has a net profit margin of 12.80% and is more profitable than the average company in the Diversified Utilities industry. In terms of efficiency, ES has an asset turnover ratio of 0.23. This figure represents the amount of revenue a company generates per dollar of assets. ES’s financial leverage ratio is 2.03, which indicates that the company’s asset base is primarily funded by debt. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 9.00%, which is worse than the Diversified Utilities industry average ROE.
Eversource Energy (ES) pays out an annual dividend of 1.90 per share. At the current valuation, this equates to a dividend yield of 2.89%. The company has a payout ratio of 60.60%. ES’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is -0.3. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 21.33, and is more expensive than the average stock in the Diversified Utilities industry. The average investment recommendation for ES, taken from a group of Wall Street Analysts, is 2.30, or a buy.
Over the past three months, Eversource Energy insiders have been net buyers, dumping a net of -10,098 shares. This implies that insiders have been feeling relatively bearish about the outlook for ES. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. ES has a beta of 0.32 and therefore an below average level of market volatility.
Public Service Enterprise Group Incorporated (NYSE:PEG) operates in the Diversified Utilities segment of the Utilities sector. PEG has increased sales at a -3.90% CAGR over the past five years, and is considered a low growth stock. The company has a net profit margin of 5.70% and is more profitable than the average Diversified Utilities player. PEG’s asset turnover ratio is 0.22 and the company has financial leverage of 2.14. PEG’s return on equity of 4.00% is worse than the Diversified Utilities industry average.
Public Service Enterprise Group Incorporated (PEG) pays a dividend of 1.72, which translates to dividend yield of 3.28% based on the current price. Stock has a payout ratio of 165.10%. According to this ratio, PEG should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 0 and has a P/E of 51.17. Compared to the average company in the 14.36 space, PEG is relatively expensive. The average analyst recommendation for PEG is 2.10, or a buy.
Public Service Enterprise Group Incorporated insiders have sold a net of -297,869 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, PEG’s beta of 0.44 indicates that the stock has an below average level of market risk.
Eversource Energy (NYSE:ES) scores higher than Public Service Enterprise Group Incorporated (NYSE:PEG) on 10 of the 13 measures compared between the two companies. ES has the better fundamentals, scoring higher on growth, profitability, efficiency, leverage and return metrics. ES has better insider activity and sentiment signals.