Investment Thesis
AES Corp exhibits critical financial distress signals with interest coverage of 0.3x, indicating inability to service debt from operating income. Negative free cash flow of -$565M combined with deteriorating EPS (-46.6%) despite positive net income growth reveals structural cash burn masked by accounting profitability.
Strengths
- Positive operating cash flow of $1.2B demonstrates underlying business generates cash
- Net profit margin of 15.3% shows profitability at bottom line despite operational constraints
- Large asset base of $52.8B and gross margins of 20.1% reflect established market position
Risks
- Critical interest coverage of 0.3x indicates inability to cover interest obligations from operating income - severe default risk
- Negative free cash flow of -$565M after capex suggests unsustainable cash burn requiring external financing
- Current ratio of 0.73x and quick ratio of 0.65x indicate acute liquidity pressure and potential covenant violations
- EPS decline of 46.6% with only 1.1% net income growth reveals significant shareholder dilution masking underlying weakness
- Minimal operating margin of 3.0% leaves insufficient buffer for operational disruptions
Key Metrics to Watch
- Interest coverage ratio trend - must improve above 2.0x to indicate solvency recovery
- Free cash flow sustainability - negative FCF is unsustainable without capital raises or asset sales
- Debt maturity schedule and refinancing needs given liquidity constraints
- Operating cash flow stability - deterioration would signal core business weakness
Financial Metrics
Revenue
3.2B
Net Income
487.0M
EPS (Diluted)
$0.68
Free Cash Flow
-565.0M
Total Assets
52.8B
Cash
1.6B
Profitability Ratios
Gross Margin
20.1%
Operating Margin
3.0%
Net Margin
15.3%
ROE
11.0%
ROA
0.9%
FCF Margin
-17.8%
Balance Sheet & Liquidity
Current Ratio
0.73x
Quick Ratio
0.65x
Debt/Equity
0.00x
Debt/Assets
0.0%
Interest Coverage
0.27x
Long-term Debt
N/A
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-09T09:20:25.260565 |
Data as of: 2026-03-31 |
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