Value
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.6 |
| P/S | 9.1 |
| EV/EBITDA | 4.3 |
| Fwd P/E | 8.0 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 14.9x
- ▸PEG: 0.27
AQN · Why this verdict
Why Algonquin Power & Utilities Cor (AQN) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
The utility trades above its price target with negative free cash flow, quality at the minimum acceptable floor, and deteriorating momentum — the setup favors reducing exposure rather than adding, as both the income appeal and the risk/reward geometry are unfavorable.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Free cash flow is deeply negative relative to net income — at -161%, the company is not converting reported earnings into cash, raising serious questions about the sustainability of its capital return program and its capacity to self-fund operations. Quality breakdown | Over 12 months, free cash flow should turn positive and FCF as a percentage of net income should recover above 50% to confirm that reported earnings are backed by real cash generation. | →Stable |
| CounterUtilities routinely run negative reported free cash flow during large capital expenditure programs that expand the regulated rate base; if those investments earn an allowed return, the apparent cash deficit may resolve as projects complete and depreciation catches up. | ||
The dividend yield is flagged as potentially uncovered — a high headline yield unsupported by free cash flow creates a yield trap where investors chasing income may face a distribution cut rather than a compounding return. Catalyst breakdown | Dividend coverage should improve materially over 12 months; if free cash flow recovers, payout sustainability will follow — but a cut or suspension would confirm the income risk. | →Stable |
| CounterRegulated utilities often maintain dividends across multiple rate cycles by accessing debt and equity markets; a supportive rate case outcome could sustain the distribution longer than current cash flow metrics suggest. | ||
Business quality sits at the minimum acceptable threshold, with weak return on assets, thin operating margins, and quality at the floor — leaving no buffer against further operational deterioration before the position becomes untenable. Scores | Return on assets and operating margin should improve over the next 12 months, pushing the quality score measurably above its current level and signaling that the fundamental franchise is recovering. | →Stable |
| CounterA Piotroski F-Score of 7 out of 9 indicates balance-sheet health that often leads broader quality improvement; the score may be a leading indicator of recovery even while margin metrics remain soft. | ||
Price momentum has fallen below acceptable levels with on-balance volume declining and the stock sitting below its 200-day moving average — though the moving average itself is still rising slightly, leaving open the possibility this is a pullback within an uptrend rather than a confirmed breakdown. Momentum breakdown | The stock should reclaim its 200-day moving average and on-balance volume should stabilize or reverse upward within 12 months to confirm the uptrend is intact. | →Stable |
| CounterThe 200-day moving average is still rising modestly, meaning the longer-term trend has not yet rolled over; a sentiment or macro catalyst could quickly restore momentum without requiring any fundamental improvement. | ||
Free cash flow is deeply negative relative to net income — at -161%, the company is not converting reported earnings into cash, raising serious questions about the sustainability of its capital return program and its capacity to self-fund operations.
→StableQuality breakdown
- Expectation
- Over 12 months, free cash flow should turn positive and FCF as a percentage of net income should recover above 50% to confirm that reported earnings are backed by real cash generation.
CounterUtilities routinely run negative reported free cash flow during large capital expenditure programs that expand the regulated rate base; if those investments earn an allowed return, the apparent cash deficit may resolve as projects complete and depreciation catches up.
The dividend yield is flagged as potentially uncovered — a high headline yield unsupported by free cash flow creates a yield trap where investors chasing income may face a distribution cut rather than a compounding return.
→StableCatalyst breakdown
- Expectation
- Dividend coverage should improve materially over 12 months; if free cash flow recovers, payout sustainability will follow — but a cut or suspension would confirm the income risk.
CounterRegulated utilities often maintain dividends across multiple rate cycles by accessing debt and equity markets; a supportive rate case outcome could sustain the distribution longer than current cash flow metrics suggest.
Business quality sits at the minimum acceptable threshold, with weak return on assets, thin operating margins, and quality at the floor — leaving no buffer against further operational deterioration before the position becomes untenable.
→StableScores
- Expectation
- Return on assets and operating margin should improve over the next 12 months, pushing the quality score measurably above its current level and signaling that the fundamental franchise is recovering.
CounterA Piotroski F-Score of 7 out of 9 indicates balance-sheet health that often leads broader quality improvement; the score may be a leading indicator of recovery even while margin metrics remain soft.
Price momentum has fallen below acceptable levels with on-balance volume declining and the stock sitting below its 200-day moving average — though the moving average itself is still rising slightly, leaving open the possibility this is a pullback within an uptrend rather than a confirmed breakdown.
→StableMomentum breakdown
- Expectation
- The stock should reclaim its 200-day moving average and on-balance volume should stabilize or reverse upward within 12 months to confirm the uptrend is intact.
CounterThe 200-day moving average is still rising modestly, meaning the longer-term trend has not yet rolled over; a sentiment or macro catalyst could quickly restore momentum without requiring any fundamental improvement.
Per-dimension breakdown
Quality
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.9 |
| ROA | 1.5 |
| Gross margin | 3.4 |
| Op margin | 9.1 |
| Net margin | 3.4 |
| Current ratio | 4.1 |
| FCF quality | 0.0 |
| Moat | 5.6 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: -161% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
8.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.1 |
| EPS growth | 10.0 |
Momentum
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 6.4 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 0.0 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.8 |
| erm sentiment | 4.5 |
Insider
5.0/10data confidence 50%Peer rank
3.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.0 |
| quality rank | 1.0 |
| growth rank | 6.0 |
Technical
2.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.5 |
| 52w position | 7.2 |
Risk (lower is worse)
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| days to cover | 9.0 |
| volatility | 8.0 |
| put call | 9.3 |
| implied vol | 1.6 |
| beta | 7.6 |
| debt equity | 4.3 |
- ▸High IV: 70%
Catalyst
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 3.5 |
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:6.2>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:42d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.5=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.46
Upside
-2.3%
Downside
5.0%
Sizing output
AVOID
SetupMOMENTUM_CONT — Trend continuation, RSI 57, MACD bullish
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — MCap $4.6B<$5B
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Growth at 8.1 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:-0.5=NEGATIVE.
The strongest dimensions are Growth at 8.1, Value at 6.9, and Catalyst at 6.7; the weakest are Technical at 2.6, Peer rank at 3.8, and Quality at 4.0. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.46 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Free cash flow is deeply negative relative to net income — at -161%, the company is not converting reported earnings into cash, raising serious questions about the sustainability of its capital return program and its capacity to self-fund operations.
Trip ifFCF as a percentage of net income rises above 50% for 2 consecutive quarters.
- P2The dividend yield is flagged as potentially uncovered — a high headline yield unsupported by free cash flow creates a yield trap where investors chasing income may face a distribution cut rather than a compounding return.
Trip ifFree cash flow turns positive and covers the annual dividend by more than 1.0x for 2 consecutive quarters.
- P3Business quality sits at the minimum acceptable threshold, with weak return on assets, thin operating margins, and quality at the floor — leaving no buffer against further operational deterioration before the position becomes untenable.
Trip ifQuality score rises above 5.5 on the 10-point scale for 2 consecutive reporting periods.
- P4Price momentum has fallen below acceptable levels with on-balance volume declining and the stock sitting below its 200-day moving average — though the moving average itself is still rising slightly, leaving open the possibility this is a pullback within an uptrend rather than a confirmed breakdown.
Trip ifPrice reclaims and holds above the 200-day moving average for more than 4 consecutive weeks.