FirstEnergy (NYSE: FE) and Dynegy (NYSE:DYN) are both utilities companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, dividends, risk and institutional ownership.

Insider & Institutional Ownership

82.3% of FirstEnergy shares are held by institutional investors. 0.3% of FirstEnergy shares are held by insiders. Comparatively, 1.8% of Dynegy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

FirstEnergy pays an annual dividend of $1.44 per share and has a dividend yield of 4.7%. Dynegy does not pay a dividend. FirstEnergy pays out -12.2% of its earnings in the form of a dividend.

Profitability

This table compares FirstEnergy and Dynegy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
FirstEnergy -35.99% 19.29% 2.79%
Dynegy -0.22% -17.98% -2.46%

Volatility & Risk

FirstEnergy has a beta of 0.25, indicating that its stock price is 75% less volatile than the S&P 500. Comparatively, Dynegy has a beta of 1.9, indicating that its stock price is 90% more volatile than the S&P 500.

Valuation & Earnings

This table compares FirstEnergy and Dynegy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
FirstEnergy $14.56 billion 0.93 -$6.18 billion ($11.77) -2.58
Dynegy $4.32 billion 0.39 -$1.24 billion ($0.23) -51.22

Dynegy has lower revenue, but higher earnings than FirstEnergy. Dynegy is trading at a lower price-to-earnings ratio than FirstEnergy, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings for FirstEnergy and Dynegy, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FirstEnergy 0 10 5 0 2.33
Dynegy 0 4 5 0 2.56

FirstEnergy presently has a consensus target price of $35.38, suggesting a potential upside of 16.67%. Dynegy has a consensus target price of $13.01, suggesting a potential upside of 10.46%. Given FirstEnergy’s higher probable upside, equities research analysts clearly believe FirstEnergy is more favorable than Dynegy.

Summary

FirstEnergy beats Dynegy on 9 of the 15 factors compared between the two stocks.

FirstEnergy Company Profile

FirstEnergy Corp. is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries. Its segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other. As of December 31, 2016, the Regulated Distribution segment distributed electricity through the Company’s 10 utility operating companies, serving approximately six million customers, and purchased power for its provider of last resort (POLR), standard offer service (SOS), standard offer service (SSO) and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). The CES segment primarily supplies electricity to end use customers through retail and wholesale arrangements.

Dynegy Company Profile

Dynegy Inc. (Dynegy) is a holding company and conducts the business operations through its subsidiaries. The primary business of Dynegy is the production and sale of electric energy, capacity and ancillary services from the fleet of 18 operating power plants in six states totaling approximately 12,300 megawatt (MW) of generating capacity. Dynegy sells electric energy, capacity and ancillary services on a wholesale basis from its power generation facilities. Its customers include Regional Transmission Organization (RTOs) and Independent System Operators (ISOs), integrated utilities, municipalities, electric cooperatives, transmission and distribution utilities, industrial customers, power marketers, financial participants, such as banks and hedge funds, other power generators and commercial end-users. It has three segments: Midwest segment (GEN-MW), West segment (GEN-WE) and Northeast segment (GEN-NE). Its wholly owned subsidiary is Dynegy Holdings Inc. (DHI).

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