FirstEnergy Corporation (FE)

Conclusion

FirstEnergy is a US regulated electric utility. It generates, transmits and distributes electricity to customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. At 46.62 USD on 2026-11-09, its market capitalisation is 27.0 billion USD and its enterprise value is 57.0 billion USD.

The verdict is fair. The fair value band runs from 37.12 to 55.68 USD with a midpoint of 46.40 USD, a margin of safety of -0.5% at the current price. The fair value from historical multiples is also 46.40 USD. Against their own ten-year medians, the price-to-earnings ratio of 22.45 sits above 20.99, and the enterprise value to EBITDA of 14.36 sits above 11.66, while price to book of 2.08 sits below 2.42. The reverse DCF is not available, so the growth the price implies cannot be set against the growth delivered. Revenue grew at a compound 6.9% over five years, but earnings per share fell at a compound 2.4% over the same period.

The strongest numbers are the operating margin of 18.7%, against a ten-year median of 17.6%, the five-year revenue growth of 6.9%, and the dividend yield of 3.9%. The weakest are net debt to EBITDA of 7.56x, interest coverage of 2.34x, and free cash flow conversion of -179.4% over the last twelve months.

Financial health

Financial strength is red, because liquidity and leverage are both assessed as bad. The current ratio is 0.38 and the quick ratio is 0.25. Net debt to EBITDA is 7.56x, debt to equity is 2.32, and interest coverage is 2.34x. The Altman Z-score is 0.70, in the distress zone. That model was designed for manufacturers, and this company is a utility, so the reading is only a rough guide. Insolvency risk: low, about 1.6% by the estimate of the Ohlson model over one to two years, based on the 2025 annual statements. Debt growth relative to revenue growth over five years is -4.9%.

Earnings quality

Earnings quality is red, because free cash flow conversion is negative on both bases. It is -179.4% over the last twelve months and -79.8% over five years. The accrual ratio is -5.0%. Free cash flow after stock-based compensation is -2.16 billion USD over the last twelve months. The company does not report its stock-based compensation, so that ratio is not available. The share count grew at a compound 1.3% a year over five years, so there were no net buybacks. The Piotroski score is 5 out of 9. The Beneish M-score is not available. Over the last eight quarters the company beat earnings estimates five times and missed twice, with an average surprise of 3.7%. Next-year earnings estimates have been cut: six analysts lowered them in the last 30 days and two raised them.

Profitability

Profitability is green, led by the operating margin. The operating margin is 18.7% against a ten-year median of 17.6%. The net margin is 7.4% against a median of 7.8%, and the gross margin is 54.5% against a median of 65.7%. Return on invested capital is 6.1% against a weighted average cost of capital of 6.5%, giving a ROIC minus WACC value of -0.35%, which is neutral. The five-year median ROIC is 6.25%. The DuPont split shows a net margin of 6.8%, an asset turnover of 0.27 and an equity multiplier of 4.47. Return on equity of 9.3% therefore relies heavily on leverage, not on margins.

Growth

Growth is red, because earnings per share have shrunk over five years. Revenue grew at a compound 6.6% over three years, 6.9% over five years, and 0.04% over ten years. Earnings per share grew at a compound 35.5% over three years, but fell at a compound 2.4% over five years and grew 2.6% over ten years. Revenue rose in five of the ten comparable years. Analysts expect earnings per share to grow 7.4% next year.

Valuation

Valuation is yellow, because the verdict is fair and the margin of safety is close to zero. Against ten-year medians, the price-to-earnings ratio of 22.45 carries a premium of 7.0% over 20.99. Enterprise value to EBITDA of 14.36 carries a premium of 23.1% over 11.66. Price to sales of 1.66 is at a discount of 5.3% to 1.76, and price to book of 2.08 is at a discount of 14.1% to 2.42. Price to free cash flow is not assessable, since free cash flow is negative. The DCF uses a discount rate of 8.9% and a long-term growth rate of 2.5%, but its value per share is not available. The fair value band rests on fixed assumptions, a 5% equity risk premium and capped growth, and is not a price target. The dividend yield is 3.9%, with a forward yield of 3.94%. The payout on free cash flow is not available, because free cash flow is negative.

Risks

Leverage is the main risk. Net debt of 7.56 times EBITDA and interest coverage of 2.34x leave little room if earnings fall or borrowing costs rise. The current ratio of 0.38 shows thin short-term liquidity. Negative free cash flow means the dividend is not covered by cash generation, and the share count has risen over five years. The company does not report its stock-based compensation, and the Beneish M-score, the DCF value per share and the reverse DCF are not available. Price to free cash flow cannot be assessed. This analysis has no debt maturity schedule and no revenue by segment, so refinancing timing and business mix cannot be judged here.