Q: I am considering swamping Fortis out for Capital Power for higher overall return in the intermediate term (3 to 5 years). Thoughts?
5i Research Answer:
FTS is trading at 17.4x Forward P/E, net debt/EBITDA is around 6.0x, FTS reinvests heavily back into the business, and dividends and buybacks were funded largely by debt.
CPX is trading at 8.8x Forward P/E, net debt/EBITDA is around 2.5x, buyback and dividends were funded through a combination of debt and free cash flow.
CPX is more attractive given the valuation and stronger balance sheet, but FTS is a more stable, predictable business over the years. We like both but if looking for a higher total return (likely with additional volatility), we would be fine with a switch to CPX.