Edison International (NYSE:EIX) and RWE (OTCMKTS:RWEOY) Critical Contrast

Edison International (NYSE:EIX) and RWE (OTCMKTS:RWEOY) are both large-cap utilities companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Edison International and RWE, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Edison International	1	8	6	1	2.44
RWE	0	1	3	1	3.00

Edison International presently has a consensus target price of $64.30, indicating a potential upside of 12.80%. RWE has a consensus target price of $53.30, indicating a potential upside of 7.31%. Given Edison International’s higher possible upside, research analysts clearly believe Edison International is more favorable than RWE.

Insider and Institutional Ownership

88.9% of Edison International shares are owned by institutional investors. 1.2% of Edison International shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Edison International and RWE”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Edison International	$18.09 billion	1.21	$1.55 billion	$7.65	7.45
RWE	$26.22 billion	1.28	$5.56 billion	$3.84	12.93

RWE has higher revenue and earnings than Edison International. Edison International is trading at a lower price-to-earnings ratio than RWE, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Edison International and RWE’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Edison International	17.24%	13.62%	2.63%
RWE	11.32%	4.85%	1.75%

Dividends

Edison International pays an annual dividend of $3.31 per share and has a dividend yield of 5.8%. RWE pays an annual dividend of $0.87 per share and has a dividend yield of 1.8%. Edison International pays out 43.3% of its earnings in the form of a dividend. RWE pays out 22.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Edison International has raised its dividend for 23 consecutive years. Edison International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Edison International has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500. Comparatively, RWE has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500.

Summary

Edison International beats RWE on 11 of the 17 factors compared between the two stocks.

About Edison International

Edison International, through its subsidiaries, engages in the generation and distribution of electric power. The company supplies and delivers electricity to approximately 50,000 square mile area of southern California to residential, commercial, industrial, public authorities, agricultural, and other sectors. Its transmission facilities consist of lines ranging from 55 kV to 500 kV and approximately 80 transmission substations; distribution system consists of approximately 38,000 circuit-miles of overhead lines; approximately 31,000 circuit-miles of underground lines; and 730 distribution substations. The company was founded in 1886 and is based in Rosemead, California.

About RWE

RWE Aktiengesellschaft generates and supplies electricity from renewable and conventional sources in Germany, the United Kingdom, rest of Europe, North America, and internationally. It operates through five segments: Offshore Wind; Onshore Wind/Solar; Hydro/Biomass/Gas; Supply & Trading; and Coal/Nuclear. The company generates wind, hydro, solar, nuclear, gas, and biomass electricity. It also trades in electricity, gas, and energy commodities; operates gas storage facilities; and engages in battery storage activities. The company serves commercial, industrial, and corporate customers. RWE Aktiengesellschaft was founded in 1898 and is headquartered in Essen, Germany.