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AES (AES): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 2026, to Sep 30, 2026, filed Nov 3, 2026; rules v1.1
AES (AES): 2 rules of 10 triggered on the filings to Sep 30, 2026: low P/E at a cyclical peak = undervalued; FCF growth = the business improved; 4 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Low P/E at a cyclical peak = undervalued Triggered · severity high · confidence medium
The shares trade at 6.0× this year's net income of $1.8B, but that profit is at a high: the median of the last eight fiscal years is $303M, on which the same market value is 35.1×. A low multiple of peak profit is not a low multiple of normal profit.
Innocent reading: The business has changed for good (a merger, a new line, a pricing regime) and the old years are not its normal.
FCF growth = the business improved Triggered · severity medium · confidence medium
Free cash flow rose $3.0B, from −$4.6B to −$1.6B, but working capital released $179M more cash than the year before and capital expenditure fell by $1.5B: 54% of the increase came from sources that need not repeat. Operating cash flow before working capital rose by $1.4B.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
Every rule
A01 FCF growth = the business improved Triggered severity medium · confidence medium
Free cash flow rose $3.0B, from −$4.6B to −$1.6B, but working capital released $179M more cash than the year before and capital expenditure fell by $1.5B: 54% of the increase came from sources that need not repeat. Operating cash flow before working capital rose by $1.4B.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | $2.8B |
| Operating cash flow | $4.3B |
| Capex, year before | $7.4B |
| Capex | $5.9B |
| Free cash flow, year before | −$4.6B |
| Free cash flow | −$1.6B |
| Change in FCF | $3.0B |
| Change in capex | −$1.5B |
| Working capital: change in its cash contribution | $179M |
| Of which: capex cut | $1.5B |
| Of which: working capital released | $179M |
| Share of the increase that need not repeat | +54.4% |
| Operating cash flow before working capital: change | 1375000000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 0.1% of revenue: small enough that adding it back changes little.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $14M |
| Revenue | $12.2B |
| SBC / revenue | +0.1% |
| Buybacks | 0 |
| Buybacks / SBC | 0.0 |
| Diluted shares, year before | 713.0M shares |
| Diluted shares | 714.0M shares |
| Diluted shares: change | +0.1% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 5% against revenue 16% in Q3 2026; DSO 45 against a median of 48: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q3 2026 |
| Revenue, year over year | +15.6% |
| Receivables, year over year | +4.6% |
| Quarter before | Q2 2026 |
| Revenue y/y, quarter before | +19.9% |
| Receivables y/y, quarter before | 174.82 |
| Days sales outstanding | 45.2 |
| DSO, median of eight quarters | 47.7 |
| Receivables | $1.9B |
| Revenue | $3.9B |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q3 2026 (receivables and revenue) · Q3 2025 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Insufficient data
no debt figure could be read from the balance sheet (the filing may tag it in other lines)
D03 EPS growth = profit growth Insufficient data
no quarter with EPS, net income and diluted shares for both this year and last
E02 Low P/E at a cyclical peak = undervalued Triggered severity high · confidence medium
The shares trade at 6.0× this year's net income of $1.8B, but that profit is at a high: the median of the last eight fiscal years is $303M, on which the same market value is 35.1×. A low multiple of peak profit is not a low multiple of normal profit.
The figures and how they are read
| market value | $10.6B |
| net income ttm | $1.8B |
| pe ttm | 6.00 |
| net income median fy | $303M |
| pe mid cycle | 35.10 |
| net income peak fy | $1.7B |
| years | FY2018 / 1203.0; FY2019 / 303.0; FY2020 / 46.0; FY2021 / -409.0; FY2022 / -546.0; FY2023 / 249.0; FY2024 / 1679.0; FY2025 / 910.0 |
| down years in window | 5 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 2026 (net income, trailing twelve months)
What would explain it innocently
- The business has changed for good (a merger, a new line, a pricing regime) and the old years are not its normal
- The market is right that profit will fall, and the price already says so
- Capacity has left the industry, so the cycle's trough is higher than before
What to look for in the filing
- Where the industry's prices and volumes stand against their own history
- Capacity on order across the industry
- Management's view of the cycle in the MD&A
What would show the trap does not apply
- Profit holds at this level through the next two years (the eight-year peak was a new base, not a top)
- The industry's capacity and prices stay where they are rather than reverting
Look again: next filing.
E07 A precise DCF value = the true value Insufficient data
no DCF in the valuation research for this company
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → AES: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.