MGE Energy (MGEE) vs. Edison International (EIX) Critical Comparison

MGE Energy (NASDAQ: MGEE) and Edison International (NYSE:EIX) are both utilities companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, institutional ownership, dividends, valuation, analyst recommendations, profitability and risk.

Profitability

This table compares MGE Energy and Edison International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MGE Energy 13.52% 10.31% 4.23%
Edison International 13.18% 10.84% 2.99%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for MGE Energy and Edison International, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MGE Energy 0 1 0 0 2.00
Edison International 1 8 5 0 2.29

Edison International has a consensus target price of $78.92, suggesting a potential upside of 33.89%. Given Edison International’s stronger consensus rating and higher possible upside, analysts clearly believe Edison International is more favorable than MGE Energy.

Dividends

MGE Energy pays an annual dividend of $1.29 per share and has a dividend yield of 2.3%. Edison International pays an annual dividend of $2.42 per share and has a dividend yield of 4.1%. MGE Energy pays out 58.6% of its earnings in the form of a dividend. Edison International pays out 55.3% 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. MGE Energy has increased its dividend for 13 consecutive years and Edison International has increased its dividend for 42 consecutive years. Edison International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

38.3% of MGE Energy shares are held by institutional investors. Comparatively, 80.1% of Edison International shares are held by institutional investors. 0.2% of MGE Energy shares are held by insiders. Comparatively, 0.4% of Edison International shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility and Risk

MGE Energy has a beta of 0.24, indicating that its share price is 76% less volatile than the S&P 500. Comparatively, Edison International has a beta of 0.17, indicating that its share price is 83% less volatile than the S&P 500.

Valuation & Earnings

This table compares MGE Energy and Edison International’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MGE Energy $544.74 million 3.59 $75.56 million $2.20 25.61
Edison International $11.87 billion 1.62 $1.43 billion $4.38 13.46

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

Summary

Edison International beats MGE Energy on 12 of the 17 factors compared between the two stocks.

MGE Energy Company Profile

MGE Energy, Inc. (MGE) is a public utility holding company. The Company operates through five segments: Regulated electric utility operations; Regulated gas utility operations; Nonregulated energy operations; Transmission investments, and All other. The Regulated electric utility operations segment is engaged in generating, purchasing and distributing electricity through Madison Gas and Electric Company (MGE). The Regulated gas utility operations segment is engaged in purchasing and distributing natural gas through MGE. The Nonregulated energy operations segment is engaged in owning and leasing electric generating capacity that assists MGE through MGE Energy’s subsidiaries MGE Power Elm Road, LLC and MGE Power West Campus, LLC. The Transmission investments segment represents its investment in American Transmission Company LLC and ATC Holdco, LLC. The All other segment is engaged in investing and financing in companies and property that relate to the regulated operations.

Edison International Company Profile

Edison International is the holding company of Southern California Edison Company (SCE). As of December 31, 2016, SCE, a public utility, was primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. The Company is also the parent company of Edison Energy Group, Inc. (Edison Energy Group), a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar to commercial and industrial customers. SCE’s projects include West of Devers, Mesa Substation, Alberhill System, Riverside Transmission Reliability, Eldorado-Lugo-Mohave Upgrade, Tehachapi and Coolwater-Lugo. As of December 31, 2016, the West of Devers Project consisted of upgrading and reconfiguring approximately 48 miles of existing 220 kilovolt (kV) transmission lines between the Devers, El Casco, Vista and San Bernardino substations.

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