At the current price of $98, what are market expectations regarding Advanced Energy Industries’ future operating performance? Over the next 6 years, Advanced Energy Industries shares will need to reach $165 to achieve average annual stock market performance of 9.0%. To achieve Upper quartile performance, Advanced Energy Industries’ stock price will need to reach $194 by 2029.
Executive Summary
- Key Advanced Energy Industries characteristics: high expected growth, instability, low profitability, and low financial strength. A big positive influence on Advanced Energy Industries’ valuation is its superior Growth.
- Low valuation, below market shareholder returns. Current valuation levels are below average relative to the Advanced Energy Industries Peer Group. Recent market returns have underperformed the Advanced Energy Industries Peer Group. Total shareholder returns expected to seriously beat the overall equity market. Based on current investor expectations, Advanced Energy Industries shares should reach a level of $185 by 2029 — an 11.6% per year total shareholder return. A 2029 stock price of $165 would reflect median performance and a price of $194 would be required to reach upper quartile performance.
- Growth has been Advanced Energy Industries’ biggest valuation strength. Historical growth has been very high relative to the Advanced Energy Industries Peer Group and forecasted growth is relatively high. Equity Growth, and Asset Growth have been superior. These factors have buoyed market perceptions of Advanced Energy Industries. Advanced Energy Industries’ historical income statement growth has been lower than balance sheet growth. Revenue growth has fallen short of asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity. Advanced Energy Industries’ consensus growth expectations are higher than historical growth.
- Pretax Margin, and Pretax ROA are group lagging. These factors have negatively affected market perceptions of Advanced Energy Industries. The company has normal cash needs.
- Advanced Energy Industries’ risk profile is unfavorable. Overall variability has been relatively low with relatively low revenue variability, only average E.P.S. variability, and above average stock price volatility. Financial Strength is below average and earnings’ expectations are below average. The debt/capital ratio has risen.
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