Analyzing FirstEnergy (NYSE:FE) & RWE (OTCMKTS:RWEOY)

FirstEnergy (NYSE:FE) and RWE (OTCMKTS:RWEOY) are both large-cap utilities companies, but which is the better business? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, risk, analyst recommendations, earnings and dividends.

Profitability

This table compares FirstEnergy and RWE’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FirstEnergy	6.86%	10.51%	2.62%
RWE	15.16%	4.77%	1.83%

Volatility & Risk

FirstEnergy has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, RWE has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.

Insider & Institutional Ownership

89.4% of FirstEnergy shares are owned by institutional investors. 0.1% of FirstEnergy shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

FirstEnergy pays an annual dividend of $1.86 per share and has a dividend yield of 3.8%. RWE pays an annual dividend of $1.00 per share and has a dividend yield of 1.5%. FirstEnergy pays out 98.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RWE pays out 26.4% of its earnings in the form of a dividend. FirstEnergy has raised its dividend for 3 consecutive years. FirstEnergy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent recommendations for FirstEnergy and RWE, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FirstEnergy	0	6	7	0	2.54
RWE	0	5	2	0	2.29

FirstEnergy presently has a consensus target price of $52.83, suggesting a potential upside of 9.21%. RWE has a consensus target price of $53.30, suggesting a potential downside of 18.86%. Given FirstEnergy’s stronger consensus rating and higher possible upside, equities research analysts plainly believe FirstEnergy is more favorable than RWE.

Earnings & Valuation

This table compares FirstEnergy and RWE”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FirstEnergy	$15.82 billion	1.77	$1.02 billion	$1.88	25.73
RWE	$19.94 billion	2.39	$3.54 billion	$3.79	17.33

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

Summary

FirstEnergy beats RWE on 10 of the 17 factors compared between the two stocks.

About FirstEnergy

FirstEnergy Corp., through its subsidiaries, generates, transmits, and distributes electricity in the United States. It operates through Regulated Distribution and Regulated Transmission segments. The company owns and operates coal-fired, nuclear, hydroelectric, wind, and solar power generating facilities. It operates 24,080 circuit miles of overhead and underground transmission lines; and electric distribution systems, including 274,518 miles of overhead pole line and underground conduit carrying primary, secondary, and street lighting circuits. The company serves approximately 6 million customers in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, and New York. FirstEnergy Corp. was incorporated in 1996 and is headquartered in Akron, Ohio.

About RWE

RWE Aktiengesellschaft generates and supplies electricity from renewable and conventional sources in Germany, the United Kingdom, rest of Europe, North America, and internationally. It operates through five segments: Offshore Wind; Onshore Wind/Solar; Hydro/Biomass/Gas; Supply & Trading; and Coal/Nuclear. The company generates wind, hydro, solar, nuclear, gas, and biomass electricity. It also trades in electricity, gas, and energy commodities; operates gas storage facilities; and engages in battery storage activities. The company serves commercial, industrial, and corporate customers. RWE Aktiengesellschaft was founded in 1898 and is headquartered in Essen, Germany.