NRG Energy (NRG) & Westar Energy (WR) Critical Survey

NRG Energy (NYSE: NRG) and Westar Energy (NYSE:WR) are both mid-cap utilities companies, but which is the better business? We will contrast the two companies based on the strength of their analyst recommendations, earnings, risk, valuation, profitabiliy, institutional ownership and dividends.

Dividends

NRG Energy pays an annual dividend of $0.12 per share and has a dividend yield of 0.7%. Westar Energy pays an annual dividend of $1.60 per share and has a dividend yield of 3.0%. NRG Energy pays out -4.0% of its earnings in the form of a dividend. Westar Energy pays out 66.9% 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. NRG Energy has increased its dividend for 11 consecutive years.

Risk and Volatility

NRG Energy has a beta of 1.24, suggesting that its share price is 24% more volatile than the S&P 500. Comparatively, Westar Energy has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for NRG Energy and Westar Energy, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NRG Energy 0 1 6 0 2.86
Westar Energy 0 0 0 0 N/A

NRG Energy currently has a consensus price target of $20.67, indicating a potential upside of 21.93%. Given NRG Energy’s higher possible upside, equities research analysts plainly believe NRG Energy is more favorable than Westar Energy.

Insider and Institutional Ownership

93.5% of NRG Energy shares are owned by institutional investors. Comparatively, 75.0% of Westar Energy shares are owned by institutional investors. 0.3% of NRG Energy shares are owned by company insiders. Comparatively, 0.6% of Westar Energy shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares NRG Energy and Westar Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NRG Energy -7.81% 7.01% 1.09%
Westar Energy 13.28% 8.96% 3.01%

Valuation and Earnings

This table compares NRG Energy and Westar Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
NRG Energy $11.88 billion 0.45 $2.32 billion ($2.99) -5.67
Westar Energy $2.57 billion 2.95 $1.05 billion $2.39 22.36

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

NRG Energy Company Profile

NRG Energy, Inc. (NRG) is an integrated power company. The Company is engaged in producing, selling and delivering electricity and related products and services in various markets in the United States. The Company’s segments include Generation, Retail, Renewables, NRG Yield, Inc. (NRG Yield) and Corporate activities. The Generation segment includes generation, international and Boston Energy Trading and Marketing LLC (BETM). The Retail segment includes Mass customers and Business Solutions. Its Business Solutions include commercial, industrial and governmental/institutional (C&I) customers, and other distributed and reliability products. The Renewables segment includes solar and wind assets. The NRG Yield segment includes certain of the Company’s contracted generation assets. The corporate activities segment includes residential solar and electric vehicle services. The Company owned and operated approximately 47,000 megawatts (MW) of generation, as of December 31, 2016.

Westar Energy Company Profile

Westar Energy, Inc. is an electric utility. The Company provides electric generation, transmission and distribution services. The Company provides these services in central and northeastern Kansas, including the cities of Topeka, Lawrence, Manhattan, Salina and Hutchinson. Its subsidiary, Kansas Gas and Electric Company (KGE), provides these services in south-central and southeastern Kansas, including the city of Wichita. Both the Company and KGE conduct business using the name Westar Energy. The Company supplies electric energy at retail to customers in Kansas. The Company also supplies electric energy at wholesale to municipalities and electric cooperatives in Kansas, and has contracts for the sale or purchase of wholesale electricity with other utilities. As of December 31, 2016, it had 6,292 megawatts (MW) of generating capacity in service.

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