PNM Resources, Inc. (Holding Co.) (NYSE: PNM) and American Electric Power (NYSE:AEP) are both mid-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Profitability

This table compares PNM Resources, Inc. (Holding Co.) and American Electric Power’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PNM Resources, Inc. (Holding Co.) 10.05% 8.57% 2.33%
American Electric Power 12.21% 9.75% 2.75%

Risk & Volatility

PNM Resources, Inc. (Holding Co.) has a beta of 0.3, meaning that its stock price is 70% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.28, meaning that its stock price is 72% less volatile than the S&P 500.

Earnings & Valuation

This table compares PNM Resources, Inc. (Holding Co.) and American Electric Power’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
PNM Resources, Inc. (Holding Co.) $1.43 billion 2.41 $569.83 million $1.99 21.73
American Electric Power $15.95 billion 2.28 $5.12 billion $3.82 19.38

American Electric Power has higher revenue and earnings than PNM Resources, Inc. (Holding Co.). American Electric Power is trading at a lower price-to-earnings ratio than PNM Resources, Inc. (Holding Co.), indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for PNM Resources, Inc. (Holding Co.) and American Electric Power, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PNM Resources, Inc. (Holding Co.) 4 7 1 0 1.75
American Electric Power 0 9 5 0 2.36

PNM Resources, Inc. (Holding Co.) presently has a consensus target price of $38.74, suggesting a potential downside of 10.43%. American Electric Power has a consensus target price of $73.64, suggesting a potential downside of 0.52%. Given American Electric Power’s stronger consensus rating and higher probable upside, analysts clearly believe American Electric Power is more favorable than PNM Resources, Inc. (Holding Co.).

Insider & Institutional Ownership

94.2% of PNM Resources, Inc. (Holding Co.) shares are owned by institutional investors. Comparatively, 71.4% of American Electric Power shares are owned by institutional investors. 1.3% of PNM Resources, Inc. (Holding Co.) shares are owned by insiders. Comparatively, 0.2% of American Electric Power shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

PNM Resources, Inc. (Holding Co.) pays an annual dividend of $0.97 per share and has a dividend yield of 2.2%. American Electric Power pays an annual dividend of $2.36 per share and has a dividend yield of 3.2%. PNM Resources, Inc. (Holding Co.) pays out 48.7% of its earnings in the form of a dividend. American Electric Power pays out 61.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. PNM Resources, Inc. (Holding Co.) has increased its dividend for 5 consecutive years and American Electric Power has increased its dividend for 4 consecutive years.

Summary

American Electric Power beats PNM Resources, Inc. (Holding Co.) on 11 of the 17 factors compared between the two stocks.

About PNM Resources, Inc. (Holding Co.)

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.

About American Electric Power

American Electric Power Company, Inc. (AEP) is a public utility holding company that owns, directly or indirectly, all of the outstanding common stock of its public utility subsidiaries and varying percentages of other subsidiaries. The service areas of the Company’s public utility subsidiaries cover the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The Company’s segments include Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing. AEP’s vertically integrated utility operations are engaged in the generation, transmission and distribution of electricity for sale to retail and wholesale customers. Transmission and Distribution Utilities segment consists of the transmission and distribution of electricity for sale to retail and wholesale customers. AEP Transmission Holdco develops, constructs and operates transmission facilities.

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