Through TheFLY's Eyes: The AES Corporation
from Theflyonthewall.com





Another Poster-child Stock Of The 1990s Comes Back To Life

AES Corp. (AES) announced good results this morning on strong unit volume growth and good pricing power. The stock is up 3.5% in today's trading.

AES was a high flyer during the 1990s as it was the world's builder and operator of power plants. As globalization flourished, emerging markets needed power and AES provided that infrastructure. The stock was on every growth portfolio managers’ must-own list. The stock sold for $80 before high-growth markets began to crash in 2000.

With the collapse of the junk bond market, AES, with its overly leveraged balance sheet, was in trouble. The stock was nearly worthless but new management was able to keep the company afloat and has grown earnings nicely. New management has increased earnings from $0.53 in 2003 to an estimated $0.97 for 2006. Management sees double-digit EPS growth out to 2008.

The fundamental story behind investors' attraction in the 1990s remains intact--globalization will lead to tremendous growth in the demand for power and the leader in this area should make big profits for shareholders. The difference between now and then is that AES is a free cash flow machine with a lot less debt to manage. As investors search the world for growth, especially if GARP investing comes back into favor, they will have to revisit this stock.