The estimated intrinsic value of American Electric Power Company, Inc. (AEP) using a Dividend Discount Model (DDM) is $125.33 (based on the recommended DDM method), compared to the current stock price of $135.46. This suggests the stock may be overvalued by 7.5% relative to its intrinsic value.

For utility companies, which are valued primarily for their stable and predictable dividend streams, SharesGrow uses a Dividend Discount Model (DDM): Intrinsic Value = Annual Dividend ÷ (Cost of Equity − Dividend Growth Rate). This model assumes a long-term dividend growth rate of 4% — consistent with the historical average for regulated utilities — and uses a minimum 7% cost of equity. The DDM is the preferred valuation method for income-oriented stocks with stable payout histories.

The valuation uses a CAPM-derived discount rate of 4.32% (CAPM-derived from beta of 0.57). For comparison, the standard 20-year DCF model produces: Operating Cash Flow (OCF): $233.79 | Free Cash Flow (FCF): $227.84 | Net Income (NI): $79.88.