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  5. AQN: Your opinion on headwater? [Algonquin Power & Utilities Corp.]
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Investment Q&A

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Q: Your opinion on headwater?? I also own Supremex that I am up nicely and could move that or move on from AQN.
Thx
Asked by Bill on November 16, 2023
5i Research Answer:

HWX recently delivered Q3 earnings results that met analysts’ expectations while displaying solid year-over-year growth in both revenue and earnings. HWX’s balance sheet remains strong with $129M in cash and minimal debt at just $0.9M. HWX pays a $0.10 per share dividend and has a yield at 5.66%. AQN has much higher debt at $8.4B (high debt is common in this sector) and net debt/EBITDA at 8.9x. AQN cut its dividend in 2023, but still pays slightly higher than HWX at a yield of 8.53%. Forward price-to-earnings for HWX is 8.3x while AQN is 10.6x. HWX will provide its outlook for FY2024 in early December but is decent overall while displaying solid growth and a strong balance sheet. HWX is more attractive from a valuation standpoint than AQN but does face additional risks due to its smaller size (Market cap at $1.7B vs $5.5B). Of the three companies, if one is OK with the cyclicality of the sector we think HWX is the one to own.