Head-To-Head Analysis: Pepco (POM) and Calpine (CPN)

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

Profitability

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

Net Margins Return on Equity Return on Assets
Pepco 10.52% 11.08% 2.95%
Calpine -0.27% -7.68% -1.38%

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Pepco N/A N/A N/A $1.25 21.54
Calpine $6.72 billion 0.81 $92.00 million ($0.07) -215.57

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

Dividends

Pepco pays an annual dividend of $1.08 per share and has a dividend yield of 4.0%. Calpine does not pay 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.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Pepco and Calpine, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Pepco 0 0 0 0 N/A
Calpine 0 7 2 0 2.22

Calpine has a consensus target price of $14.47, indicating a potential downside of 4.12%. Given Calpine’s higher possible upside, analysts plainly believe Calpine is more favorable than Pepco.

Institutional and Insider Ownership

86.0% of Calpine shares are owned by institutional investors. 1.2% of Calpine shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

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.

Calpine Company Profile

Calpine Corporation is a power generation company. The Company is engaged in the ownership and operation of primarily natural gas-fired and geothermal power plants in North America. The Company’s segments include West (including geothermal), Texas and East (including Canada). In the Northeast and Mid-Atlantic regions, the Company has generating units capable of burning either natural gas or fuel oil. As of December 31, 2016, the Company’s portfolio consisted of two types of power generation technologies, including natural gas-fired combustion turbines, such as combined-cycle plants, and renewable geothermal conventional steam turbines. As of December 31, 2016, the Company’s portfolio included 80 power plants, including one under construction, with an aggregate generation capacity of 25,908 Megawatt (MW) and 828 MW under construction. As of December 31, 2016, it had four MW of capacity from solar power generation technology at its Vineland Solar Energy Center in New Jersey.

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