Companhia Paranaense de Energia (ADR) (ELP), NRG Energy Inc (NRG), Atlantic Power Corp (AT): 3 Well Capitalized Utilities That Look Undervalued

Company two

Company number two is NRG Energy Inc (NYSE:NRG). NRG operates within the US, acquiring, developing and managing power stations and related infrastructure. NRG is currently on offer with a P/B ratio of 0.8 and a P/E ratio of around 12.2.

NRG Energy Inc (NYSE:NRG) has a current ratio of 1.5 and a debt-to-equity level of 160%, higher than I would like; however, the company is able to cover its interest costs 2.8 times from gross profit.

NRG has achieved EPS growth of 4.3% during the past five years and like COPEL, this slow growth and low yield of 1.9% are the reasons for the company’s low valuation.

Unfortunately, NRG Energy Inc (NYSE:NRG) has underperformed during the past few years, but it could be in the process of changing its fortunes.

Renewable energy could be the next great investment and NRG is well positioned to take advantage of this. NRG Energy Inc (NYSE:NRG) is the nation’s largest developer of solar power, with a growing portfolio of large solar plants and installations at sports stadiums, commercial buildings and homes.

In addition, the company is targeting the electric-vehicle market by developing a network of ‘home-and-away’ charging stations for battery-powered vehicles within Texas.

Overall, NRG Energy Inc (NYSE:NRG) is well positioned to take advantage of the renewable energy revolution and is currently trading below the value of its assets.

Company three

Stock number three is highly speculative but the reward could justify the risk. Atlantic Power Corp (NYSE:AT) has not had a good year so far; to date, the stock has fallen around 59% after the company slashed its dividend by 60%.

Although, there could be an opportunity here as even after its 60% cut, the company still offers a dividend yield of around 8%. Furthermore, after the dividend cut, the company is easily able to afford its payout from operating cash flow with room to spare.

Moreover, Atlantic Power Corp (NYSE:AT) is trading at a P/B ratio of 0.8, and during the first quarter of 2013 the company produced its first positive free cash flow since 2009.

Lastly, the company has a strong balance sheet with a current ratio of 1.4 and a debt-to-equity ratio of 0.23.

So far this year Atlantic Power Corp (NYSE:AT) has not performed well, but the company still offers a good dividend yield that is well covered, and the balance sheet is almost debt free.

Conclusion

So overall, these three utilities are cheap for a reason but they also offer value with high potential returns and their strong financial position lessens any speculation.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article 3 Well Capitalized Utilities That Look Undervalued originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.