QS Research · Michael Burry's Scion Capital analyst template · 2006
AMERICAN ELECTRIC POWER CO INC (AEP)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $127.84 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case +9% · downside -33% · upside +22%
The N69 base anchor is +9% at 22.6x peer-median P/E versus 20.7x today, but on clean adjusted net income AEP is 27.4x, not 20.7x, because the $817M derivative mark is 24% of TTM net income; the operating P/E is 13.8x on $5.03B tax-normalized operating earnings. The downside assumes a 5% operating earnings decline plus the $0.70/share exposure stress (N65), about -20% on adjusted earnings, and a 17.6x compressed P/E, giving about -32%. The upside is 2028 EPS midpoint of $7.55 at today's 20.7x, about +22%, so the stock is not mispriced enough for a long or a short. Data-center load and the $100B plan are real, but 6.2x net debt/EBITDA, 2.4x EBIT/interest, a 5.7% ROIC against a 4.9% WACC and a crowded short at 5.0% of shares out / 7.6 days to cover leave no margin of safety.
Key numbers
- Share price: $127.84
- Market cap: $69.61B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $23.61B
- EV / EBITDA (TTM): 14.0x
- P/E (TTM): 20.7x
- FCF yield: 4.9%
- Price / book: 2.12x
- Earnings-quality flags (TTM): Derivative mark-to-market $817.0M (24% of net income)
- P/E, adjusted (TTM): 27.4x
- P/E, operating (tax-normalized) (TTM): 13.8x
- EV / FCF (TTM): 36.7x
- Revenue growth (latest fiscal year): +8.7%
- ROIC (TTM): 5.7%
- WACC: 4.9%
- Economic profit spread: +0.8 pts
The 15 boxes
- ✓ 1. Long-form business notes
AEP is a regulated electric utility holding company whose money comes from state- and FERC-approved cost-of-service rates on generation, transmission and distribution, spread across four reportable segments and 11 states, with fuel costs passed through adjustment clauses. Between the FY2020 and FY2025 10-Ks the company got larger (17,581 employees vs 16,787) and the disclosure shifted from subsidiary-by-subsidiary generating capacity to a segment/RTO/customer table plus generation fuel mix. Operating income rose from $2.99B in FY2020 to $5.32B in FY2025 and $5.53B TTM to Sep 30 2026, but net income to common fell to $3.36B TTM from $3.58B in FY2025 on the same data series.
- ✓ 2. Competitive advantage
AEP is a regulated wires-and-generation franchise, not a merchant competitor: its public utility subsidiaries sell at rates approved by FERC and the commissions of eleven states, and the 10-K itself describes delivery to customers "usually situated within an exclusive franchise" that yields economies of scale. The only genuinely contested ground the filings describe is the Generation & Marketing segment (power, capacity, ancillary services and retail supply in competitive jurisdictions) and the periodic rate cases and FERC formula-rate challenges that set how much of its spending it is allowed to earn on. History shows the model converting a 12% rise in revenue from FY2022 ($19.39B) to FY2025 ($21.70B) into a 53% rise in operating income ($3.48B to $5.32B), but it is funded by a capex ramp ($3.45B FY2025, $4.19B TTM) against operating cash flow of $6.94B/$7.58B, and diluted shares rose from 497.23M (2020) to 550.37M (TTM).
- ✓ 3. 10-Q takeaways
Q3 2026 was a clean upside quarter: revenue $6,832 million vs $6,011 million in Q3 2025 (+$821 million), operating EPS $2.23 vs $1.80, and operating earnings $1,216 million vs $963 million. Growth came from weather-driven residential volumes, transmission investment, rate outcomes and new data-processing load in commercial and industrial, partly offset by higher interest expense and a wholesale customer credit; only $29 million of specified items separated GAAP from operating earnings. Nine-month GAAP earnings are lower ($2,774 million vs $2,998 million) only because 2025 held the $480 million FERC NOLC benefit, while nine-month operating earnings rose to $2,849 million from $2,552 million. Management guided 2026 operating EPS at or above the high end of $6.25-$6.55, set 2027 at $6.75-$7.05 and 2028 at $7.40-$7.70, and paired that with a $100 billion five-year capital plan and 13%+ rate base CAGR through 2031.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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