AEP, American Electric Power Co Inc.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- A capital-intensive business, run on heavy physical assets that have to be kept working.
- Situation
- Capital build-out. capital spending has surged to 16% of sales, today's earnings are charged less depreciation than tomorrow's will be.
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median 6%, above 15% in 0 of 10 years). Owner earnings agree: roughly 26% of revenue reaches owners as cash, consistently. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the 10-K is where you look.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $16.4B | $15.4B | $16.2B | $15.6B | $14.9B | $16.8B | $19.4B | $19.5B | $20.0B | $21.7B | $22.0B |
| Operating marginOp. mgn | 7.1% | 22.9% | 16.6% | 16.7% | 20.0% | 20.3% | 18.0% | 18.3% | 21.6% | 24.5% | 24.5% |
| Net incomeNet inc. | $611M | $1.9B | $1.9B | $1.9B | $2.2B | $2.5B | $2.3B | $2.2B | $3.0B | $3.6B | $3.7B |
| EPS (diluted)EPS | $1.24 | $3.88 | $3.90 | $3.88 | $4.42 | $4.96 | $4.49 | $4.24 | $5.58 | $6.66 | $6.68 |
| Owner earningsOwner earn. | $4.4B | $4.3B | $5.2B | $3.4B | $3.8B | — | — | $4.9B | $6.4B | $3.5B | $2.6B |
| ROICROIC | 3% | 6% | 6% | 6% | 6% | 6% | 6% | 5% | 6% | 7% | 7% |
| CapexCapex | $108M | $0 | $0 | $918M | $0 | — | — | $155M | $399M | $3.5B | $4.4B |
| Capex / revenueCapex/rev | 0.7% | 0.0% | 0.0% | 5.9% | 0.0% | — | — | 0.8% | 2.0% | 15.9% | 20.1% |
| Capex vs depreciationCapex/dep | — | — | — | — | — | — | — | 0.05× | 0.13× | 1.04× | 1.33× |
| Total debtDebt | $20.3B | $21.2B | $23.3B | $26.7B | $31.1B | $33.5B | $36.8B | $40.1B | $42.6B | $47.3B | $49.6B |
| Cash & investmentsCash+inv | $349M | $376M | $393M | $450M | $594M | $624M | $697M | $544M | $418M | $417M | $516M |
| Net debt / (cash)Net debt | $19.9B | $20.8B | $23.0B | $26.3B | $30.5B | $32.8B | $36.1B | $39.6B | $42.2B | $46.9B | $49.0B |
Owner’s Scorecard
Will it survive?
- AdequateOperating income $5.3B ÷ interest expense $2.0B
Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.
- HighTotal debt $47.3B ÷ operating income $5.3B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $46.9BHeavy net debtCash $197M + ST investments $220M − debt $47.3B
Netting $417M of cash and short-term investments against $47.3B of debt leaves $46.9B owed, about 8.8× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Not enough data
The filing data didn't include the inputs for this check.
Is it a good business?
- Below averageNOPAT $5.1B ÷ invested capital $78.3B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Cash machineOwner Earnings $3.5B = operating cash $6.9B − capex $3.5B
What an owner could take out without starving the business. That's 16% of revenue. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $6.9B ÷ net income $3.6B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns about halfDividends + buybacks $2.0B ÷ Owner Earnings $3.5B
Of $3.5B Owner Earnings, $2.0B (58%) went back to shareholders, $2.0B dividends, $0 buybacks. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 1.04×MaintainingCapex $3.5B ÷ depreciation $3.3B
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 10 of 10
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 0 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 7% (FY2016) → 25% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC 7%
Reinvested capital earned only a modest return, growth is getting expensive.
- Owner earnings growth +1%/yr
Free cash to owners grew about 1% a year over the record.
- Worst year 2016 · 7.1% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count +1.0%/yr
Roughly flat share count, little dilution, little buyback.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2016–2025
Over the record, the business generated $50.0B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a balanced allocator, splitting cash between the business, owners, and the balance sheet.
- Reinvested$5.0B · 10%
- Dividends$15.2B · 30%
- Retained (debt / cash)$29.8B · 60%
It reinvested $5.0B (10%) back into the business and returned $15.2B (30%) to owners, $15.2B in dividends, $0 in buybacks. Total debt rose $29.3B across the span.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
read the proxy →Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- CEO pay ratio261:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio isn't proof of anything, some businesses are genuinely top-heavy in scarce skill, but a runaway figure is where Buffett starts asking whether the board is doing its job or just keeping the chair company.
Graham’s defensive-investor test
4 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $21.7B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 0.45×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $47.3B vs ($7.3B) WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (10-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +97%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $6.66/share and book value $57.93/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what American Electric Power Co Inc. has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $2.6B on 547M diluted shares; net debt $49.0B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Supplier & input dependenceMD&A
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“(Applies to all Registrants) AEP's operations and business plans depend on the global supply chain to procure the equipment, materials and other resources necessary to build and provide services in a safe and reliable manner.”
A judgment, not a number, weigh it against the filing yourself. - Debt terms & refinancingBusiness
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“In addition, the acceleration of AEP's payment obligations, or the obligations of certain of its major subsidiaries, prior to maturity under any other agreement or instrument relating to debt outstanding in excess of $100 million, would cause an event of default under the credit agreements.”
From the recordBalance sheet (TTM)$46.9B heavy net debt · interest covered 2.6× - Litigation & contingenciesMD&A
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“(Applies to all Registrants) Business activities of electric utilities and related companies are heavily regulated, primarily through national and state laws and regulations of general applicability, including laws and regulations related to working conditions, health and safety, equal employment op…”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyMD&A
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“The economic impact of increased global conflicts and trade tensions, and the adoption or expansion of economic sanctions, tariffs, trade restrictions or changes in trade policy.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “Registrants are subject to the jurisdiction of many federal and state agencies, including the FERC, NERC, Commodity Futures Trading Commission, Federal EPA, NRC, Occupational Safety and Health Administration, the SEC and the United States Department of Justice which may impose significant civil and …”
- “The continued increase in federal and state regulatory requirements related to cybersecurity and evolving threat actor-capabilities could require changes to measures currently undertaken by AEP or to its business operations and could adversely affect its financial condition. 23 The failure of AEP or…”
- “Key elements of AEP's cybersecurity program include, among others: Continuous monitoring and detection of cyber threats; Vulnerability assessments and penetration testing; Incident response planning and exercises; Business continuity and disaster recovery planning; Security awareness training, inclu…”
- “ETT may file interim TCOS filings semi-annually to update its rates to reflect changes in its net invested capital. 16 GENERATION & MARKETING GENERAL Generation & Marketing focuses primarily on a retail supply business and a wholesale energy trading and marketing business which includes executing tr…”
- “Registrants are subject to the jurisdiction of many federal and state agencies, including the FERC, NERC, Commodity Futures Trading Commission, Federal EPA, NRC, Occupational Safety and Health Administration, the SEC and the United States Department of Justice which may impose significant civil and …”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Utilities
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| SOSouthern Co | $29.6B | — | 24.7% | 6% | -10% |
| NEENextera Energy, Inc. | $25.8B | — | 32.1% | 6% | — |
| AEPAmerican Electric Power Co Inc. | $21.7B | — | 24.5% | 7% | 16% |
| EIXEdison International | $19.3B | — | 36.7% | 10% | -4% |
| DDominion Energy, Inc | $16.5B | — | 26.7% | 5% | 2% |
| FEFirstenergy Corp | $15.1B | — | 14.6% | 5% | -7% |
| ESEversource Energy | $13.5B | — | 22.1% | 6% | -0% |
| ETREntergy Corp /de/ | $12.9B | — | 24.7% | 6% | -20% |