PNM Resources (NYSE: PNM) and Pepco (NYSE:POM) are both mid-cap utilities companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, profitability, earnings, analyst recommendations and risk.

Dividends

PNM Resources pays an annual dividend of $0.97 per share and has a dividend yield of 2.5%. Pepco pays an annual dividend of $1.08 per share and has a dividend yield of 4.0%. PNM Resources pays out 48.7% of its earnings in the form of a dividend. Pepco pays out 86.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PNM Resources has raised its dividend for 5 consecutive years.

Institutional and Insider Ownership

92.2% of PNM Resources shares are held by institutional investors. 1.3% of PNM Resources shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations for PNM Resources and Pepco, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PNM Resources 4 7 1 0 1.75
Pepco 0 0 0 0 N/A

PNM Resources presently has a consensus target price of $38.99, indicating a potential downside of 1.29%. Given PNM Resources’ higher probable upside, analysts plainly believe PNM Resources is more favorable than Pepco.

Profitability

This table compares PNM Resources and Pepco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PNM Resources 11.27% 9.18% 2.49%
Pepco 10.52% 11.08% 2.95%

Earnings & Valuation

This table compares PNM Resources and Pepco’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PNM Resources $1.36 billion 2.31 $117.37 million $1.99 19.85
Pepco N/A N/A N/A $1.25 21.54

PNM Resources has higher revenue and earnings than Pepco. PNM Resources is trading at a lower price-to-earnings ratio than Pepco, indicating that it is currently the more affordable of the two stocks.

Summary

PNM Resources beats Pepco on 9 of the 13 factors compared between the two stocks.

PNM Resources Company Profile

PNM Resources, Inc. (PNMR) is an investor-owned holding company with approximately two regulated utilities providing electricity and electric services in New Mexico and Texas. PNMR’s electric utilities are Public Service Company of New Mexico (PNM) and Texas-New Mexico Power Company (TNMP). It operates in three segments: PNM, TNMP, and Corporate and Other. The Company, through its Website provides information, including news releases, notices of Webcasts, and filings. PNM is an electric utility that provides electric generation, transmission and distribution service to its rate-regulated customers. TNMP is a regulated utility operating in Texas. TNMP provides transmission and distribution services in Texas under the provisions of Texas Electric Choice Act (TECA) and the Texas Public Utility Regulatory Act. The Corporate and Other segment includes PNMR holding company activities, related to corporate level debt and PNMR Services Company.

Pepco Company Profile

Pepco Holdings LLC, formerly Pepco Holdings, Inc., is a holding company. The Company, through its utility subsidiaries, is engaged in the transmission, distribution and default supply of electricity, and the distribution and supply of natural gas. The Company’s segments include Power Delivery, Pepco Energy Services, and Corporate and Other. The Company’s subsidiaries include Potomac Electric Power Company (Pepco), Delmarva Power & Light Company (DPL) and Atlantic City Electric Company (ACE). Pepco is engaged in the transmission, distribution and default supply of electricity. DPL is involved in the transmission, distribution and default supply of electricity, and distribution and supply of natural gas. ACE is engaged in the transmission, distribution and default supply of electricity. The Company’s subsidiaries own and operate a network of wires, substations and other equipment that are classified as transmission facilities, distribution facilities or common facilities.

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