Now Is Not The Time To Buy AES Stock

AES (NYSE:AES) , an American utility and power generation company,  saw its stock decline by close to 8% in Tuesday’s trading. The decline comes following the release of proposed amendments to President Trump’s tax plan by Senate Finance Committee Republicans. The changes target renewable energy incentives, aiming to phase out solar, wind, and other clean energy tax credits by 2028 versus the 2032 timeline under the Inflation Reduction Act. These changes could impact AES which has renewables accounting for about 52% of its deployed power capacity. Excluding the company’s hydropower capacity, which will not be subject to cuts in tax credits, about 29% of the company’s capacity is from renewables. Moreover, the company’s upcoming pipeline of projects is almost entirely focused on renewable assets. Other major renewables stocks saw a sharp decline too on Tuesday. See How The Tax Cuts Impact Solar Major Enphase Energy

While there are some positives for AES’s stock, including growth in data center partnerships and a low valuation, there are several concerns for the stock as well.We arrive at our conclusion by comparing the current valuation of AES stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of AES along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very weak operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does AES’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AES stock looks cheap compared to the broader market.

• AES has a price-to-sales (P/S) ratio of 0.7 vs. a figure of 3.1 for the S&P 500
• And, it has a price-to-earnings (P/E) ratio of 6.3 vs. the benchmark’s 26.9

How Have AES’s Revenues Grown Over Recent Years?

AES’s Revenues have seen a decline over recent years.

• AES has seen its top line grow at an average rate of 2.5% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have declined 3.2% from $13 Bil to $12 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues decreased 5.2% to $2.9 Bil in the most recent quarter from $3.1 Bil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is AES?

AES’s profit margins are around the median level for companies in the Trefis coverage universe.

• AES’s Operating Income over the last four quarters was $1.8 Bil, which represents a moderate Operating Margin of 15.2%
• AES Operating Cash Flow (OCF) over this period was $3.0 Bil, pointing to a moderate OCF Margin of 24.8% (vs. 14.9% for S&P 500)
• For the last four-quarter period, AES Net Income was $1.3 Bil – indicating a moderate Net Income Margin of 10.7% (vs. 11.6% for S&P 500)

Does AES Look Financially Stable?

AES’s balance sheet looks very weak.

• AES’s Debt figure was $31 Bil at the end of the most recent quarter, while its market capitalization is $7.5 Bil (as of 6/17/2025). This implies a very poor Debt-to-Equity Ratio of 375.6% (vs. 19.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $1.8 Bil of the $49 Bil in Total Assets for AES.  This yields a poor Cash-to-Assets Ratio of 3.7%

How Resilient Is AES Stock During A Downturn?

AES stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• AES stock fell 57.5% from a high of $29.27 on 13 December 2022 to $12.45 on 6 October 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 21.77 on 30 May 2024 and currently trades at around $10.50

Covid Pandemic (2020)

• AES stock fell 54.5% from a high of $21.03 on 18 February 2020 to $9.56 on 18 March 2020, vs. 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

Global Financial Crisis (2008)

• AES stock fell 79.5% from a high of $23.90 on 23 May 2007 to $4.91 on 9 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 5 January 2021

Putting All The Pieces Together: What It Means For AES Stock

In summary, AES’s performance across the parameters detailed above are as follows:

• Growth: Weak
• Profitability: Neutral
• Financial Stability: Extremely Weak
• Downturn Resilience: Extremely Weak
• Overall: Very Weak

Hence, despite its very low valuation, we think that the stock is unattractive, which supports our conclusion that AES is currently a bad stock to buy.

While you would do well to avoid AES stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics

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