Buy The Dip In AES Stock?
AES (NYSE:AES), an American utility and power generation firm, experienced a nearly 8% drop in its stock during Tuesday's trading session. This decline follows the introduction of proposed modifications to President Trump's tax plan by Senate Finance Committee Republicans. The proposed adjustments aim to reduce renewable energy incentives, intending to eliminate solar, wind, and other clean energy tax credits by 2028 instead of the 2032 timeline established by the Inflation Reduction Act. These adjustments may affect AES, which derives approximately 52% of its power capacity from renewable sources. Excluding the company's hydropower capacity, which will remain unaffected by the cuts to tax credits, around 29% of AES's capacity comes from renewable resources. Furthermore, the company's forthcoming pipeline of projects is predominantly centered on renewable assets. Other significant renewable energy stocks also witnessed a notable decline on Tuesday. See How The Tax Cuts Impact Solar Major Enphase Energy
Despite some favorable aspects for AES's stock, such as the growth in data center partnerships and a low valuation, several concerns remain. We reached our conclusion by assessing the current valuation of AES stock in relation to its operational performance over recent years, as well as its current and historical financial health. Our evaluation of AES through key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience reveals that the company has a very weak operating performance and financial status, as detailed below. However, for those seeking upside with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative – it has outperformed the S&P 500 and generated returns exceeding 91% since its inception.
When considering what you pay per dollar of sales or profit, AES stock appears inexpensive compared to the broader market.
• AES has a price-to-sales (P/S) ratio of 0.7 compared to 3.1 for the S&P 500
• Additionally, it has a price-to-earnings (P/E) ratio of 6.3 in contrast to the benchmark's 26.9
AES's Revenues have experienced a decline over the past few years.
• AES's top line has had an average growth rate of 2.5% over the last 3 years (compared to an increase of 5.5% for the S&P 500)
• Its revenues have dropped 3.2% from $13 Bil to $12 Bil in the past 12 months (against a growth of 5.5% for the S&P 500)
• Furthermore, its quarterly revenues decreased 5.2% to $2.9 Bil in the latest quarter from $3.1 Bil a year prior (versus a 4.8% improvement for the S&P 500)
AES's profit margins are around the average level for companies in the Trefis coverage universe.
• AES's Operating Income for the last four quarters was $1.8 Bil, representing a moderate Operating Margin of 15.2%
• AES's Operating Cash Flow (OCF) during this period was $3.0 Bil, indicating a moderate OCF Margin of 24.8% (compared to 14.9% for the S&P 500)
• In the last four-quarter period, AES's Net Income reached $1.3 Bil – reflecting a moderate Net Income Margin of 10.7% (compared to 11.6% for the S&P 500)
AES's balance sheet appears very weak.
• AES's Debt stood at $31 Bil at the end of the latest quarter, while its market capitalization is $7.5 Bil (as of 6/17/2025). This results in a poor Debt-to-Equity Ratio of 375.6% (compared to 19.4% for the S&P 500). [Note: A low Debt-to-Equity Ratio is preferred]
• Cash (including cash equivalents) accounts for $1.8 Bil of the total $49 Bil in AES's Total Assets. This yields a low Cash-to-Assets Ratio of 3.7%
AES stock has underperformed significantly against the benchmark S&P 500 index during several recent downturns. While investors hope for a soft landing for the U.S. economy, what might happen if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
• AES stock plummeted 57.5% from a high of $29.27 on 13 December 2022 to $12.45 on 6 October 2023, in contrast to a peak-to-trough decline of 25.4% for the S&P 500
• The stock has not yet returned to its pre-Crisis high
• The highest the stock has achieved since then is 21.77 on 30 May 2024 and is currently trading at around $10.50
• AES stock fell 54.5% from a high of $21.03 on 18 February 2020 to $9.56 on 18 March 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 11 November 2020
• AES stock declined 79.5% from a high of $23.90 on 23 May 2007 to $4.91 on 9 March 2009, versus a peak-to-trough decline of 56.8% for the S&P 500
• The stock completely recovered to its pre-Crisis peak by 5 January 2021
In conclusion, AES's performance across the parameters detailed above is summarized as follows:
• Growth: Weak
• Profitability: Neutral
• Financial Stability: Extremely Weak
• Downturn Resilience: Extremely Weak
• Overall: Very Weak
Consequently, despite its very low valuation, we believe that the stock is unattractive, which reinforces our conclusion that AES is currently a poor investment choice.
While it would be wise to steer clear of AES stock for now, you might consider the Trefis Reinforced Value (RV) Portfolio, which has consistently outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offers a flexible approach to capitalize on favorable market conditions while minimizing losses during downturns, as elaborated in RV Portfolio performance metrics.
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