AES Corp (AES) Quality Analysis

Assessing AES Corp through the GoodMoat framework reveals a business with notable strengths and critical weaknesses. On the positive side, the company's Return on Equity (ROE) of 22.4% is strong and exceeds the framework's high-return threshold of 15-20%. Its Price-to-Earnings (P/E) ratio of 11.0x is also reasonable, suggesting the market is not pricing in excessive growth. However, the quality indicators are largely unfavourable. The Free Cash Flow (FCF) yield is deeply negative at -16.2%, failing the framework's requirement for positive, growing FCF with a margin above 10-15%. The Debt/Equity ratio of 7.5 is extremely high and far exceeds the desired level of less than 1.0x Debt/EBITDA, indicating a leveraged balance sheet. Revenue growth is modest at 4.7% YoY, which is not the consistent double-digit growth sought. From a moat perspective, utilities often possess regulatory barriers, but the provided data does not confirm a durable competitive advantage scoring 5 or more points, which is the gate to proceed with a quality business under the framework. The combination of high debt, cash burn, and slow growth presents a challenging profile compared to the framework's benchmarks for a high-quality, moat-protected enterprise. Analysis based on data as of 2024-05-15.