Head to Head Survey: Ameren (NYSE:AEE) and Pinnacle West Capital (NYSE:PNW)

Pinnacle West Capital (NYSE:PNW) and Ameren (NYSE:AEE) are both large-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, valuation and dividends.

Profitability

This table compares Pinnacle West Capital and Ameren’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pinnacle West Capital	11.52%	8.99%	2.08%
Ameren	17.86%	10.95%	3.00%

Volatility & Risk

Pinnacle West Capital has a beta of 0.44, indicating that its stock price is 56% less volatile than the S&P 500. Comparatively, Ameren has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500.

Dividends

Pinnacle West Capital pays an annual dividend of $3.64 per share and has a dividend yield of 3.6%. Ameren pays an annual dividend of $3.00 per share and has a dividend yield of 2.7%. Pinnacle West Capital pays out 69.7% of its earnings in the form of a dividend. Ameren pays out 52.8% 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. Ameren has increased its dividend for 12 consecutive years.

Valuation and Earnings

This table compares Pinnacle West Capital and Ameren”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pinnacle West Capital	$5.34 billion	2.28	$616.53 million	$5.22	19.26
Ameren	$8.80 billion	3.45	$1.46 billion	$5.68	19.28

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

Insider & Institutional Ownership

91.5% of Pinnacle West Capital shares are held by institutional investors. Comparatively, 79.1% of Ameren shares are held by institutional investors. 0.2% of Pinnacle West Capital shares are held by insiders. Comparatively, 0.3% of Ameren shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current recommendations and price targets for Pinnacle West Capital and Ameren, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pinnacle West Capital	0	12	3	0	2.20
Ameren	0	3	10	0	2.77

Pinnacle West Capital presently has a consensus price target of $103.79, suggesting a potential upside of 3.23%. Ameren has a consensus price target of $121.75, suggesting a potential upside of 11.17%. Given Ameren’s stronger consensus rating and higher possible upside, analysts plainly believe Ameren is more favorable than Pinnacle West Capital.

Summary

Ameren beats Pinnacle West Capital on 15 of the 17 factors compared between the two stocks.

About Pinnacle West Capital

Pinnacle West Capital Corporation, through its subsidiary, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include overhead lines and underground lines; and distribution facilities consist of overhead lines and underground primary cables. The company also owns and maintains transmission and distribution substations; and owns energy storage facilities. Pinnacle West Capital Corporation was incorporated in 1985 and is headquartered in Phoenix, Arizona.

About Ameren

Ameren Corporation, together with its subsidiaries, operates as a public utility holding company in the United States. The company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. It engages in the rate-regulated electric generation, transmission, and distribution activities; and rate-regulated natural gas distribution business. In addition, the company generates electricity through coal, nuclear, and natural gas, as well as renewable sources, such as hydroelectric, wind, methane gas, and solar. It serves residential, commercial, and industrial customers. The company was founded in 1881 and is headquartered in Saint Louis, Missouri.