The AES Corporation (AES): A Bull Case Theory

We came across a bullish thesis on The AES Corporation on Value investing subreddit by RMOONU. In this article, we will summarize the bulls’ thesis on AES. The AES Corporation's share was trading at $14.06 as of November 28th. AES’s trailing and forward P/E were 9.25 and 6.09 respectively according to Yahoo Finance.

The AES Corporation, together with its subsidiaries, operates as a power generation and utility company in the United States and internationally. AES presents a compelling contrarian opportunity in the U.S. utilities sector, where a 12-month share price decline has created an attractive entry point for investors willing to look beyond near-term market pessimism.

Despite this weakness, AES continues to generate robust returns, with ROIC above 20% and valuation multiples that screen as deeply discounted, including EV/EBIT below 5 and P/B under 1. This valuation disconnect is notable given the company’s strategic shift toward renewable energy, which positions it to benefit from the long-term secular transition from fossil fuels to cleaner power generation.

AES’s balance sheet appears manageable as its debt/EBITDA ratio remains below 2, providing flexibility to support ongoing development while keeping leverage risks relatively contained compared to many large utility peers. The primary concern stems from the company’s negative free cash flow, driven by heavy capital expenditures required to fund its renewables pipeline. Sustained high interest rates could amplify this pressure by increasing financing costs and limiting the company’s ability to recycle capital efficiently.

Nevertheless, when viewed relative to competitors such as NextEra and Southern Company, AES offers superior return metrics at materially lower valuation levels, giving investors exposure to the energy transition without the premium typically associated with high-growth renewable platforms. This mismatch between operational strength, strategic positioning, and current market pricing creates a differentiated opportunity for value-oriented investors seeking asymmetric upside as the company executes its long-term renewable energy build-out and the market eventually reevaluates its fundamentals.

Previously we covered a bullish thesis on Constellation Energy Corporation (CEG) by jackandjillonthehill in March 2025, which highlighted nuclear-driven margin expansion, rising electricity prices, and strong ROE outperformance. The company’s stock price has appreciated approximately by 66.72% since our coverage. This is because the thesis played out despite temporary sentiment pressure. The thesis still stands as nuclear remains attractive. RMOONU shares a similar view but emphasizes AES’s deep-value positioning.

The AES Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held AES at the end of the second quarter which was 52 in the previous quarter. While we acknowledge the potential of AES as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.