Friday, April 12, 2013

Analysis of E.ON.

A German energy company


Company: E.ON.

Business: Energy in the form of nuclear, gas, coal, oil, wind and solar plants.

Active: in Europe mainly with Germany as the home market. Have made a half failed attempt to establish themselves in Brazil. Have lately started to sell off plenty of infra structure assets in Europe/Germany for their further expansion. I hope they will not fail. But I found it interesting to see that they sold their German gas net to for instance a daughter company of Münchener Rückversicherung. So I still own part of that!

P/E: 14.7

The price is from closing day on 5/4-13
contrarian values of P/E, P/B as well as dividend

For E.ON. SE the running P/E value is now up at 15 which is fairly high the P/B value is however low leads to that the company accoridng to Graham is a buy. I find that the Earnings/Sale is a bit too low and tells a bit how squeezed the market is for the energy companies. I also do not like that they are sitting on fairly much debt in the company. The growth of the company has however been around 8% for the last five years which is good and give according to Lynch and Graham a P/E value of 26 (represent a stock price of 24 €/share) for being fairly valued so there is a bit for the company to grow from the P/E of 15 which it currently has. This year they will give a dividend of 1.1 € per share which is 120 % of earnings meaning that it is not at all sustainable and they have admitted to this and will decrease it for 2013 to 50-60% of earnings. I find this fair and it should give around 0.6 € per share which represent over 4% dividend yield which is still fully acceptable.
I bought this stock due to the dividends and see no reason to sell it due to their changed dividend payment in the future.

Conclusion: The stock is a buy for the purpose of keeping for the dividends even today but it was better previously when it was down at 12.8 € less than 2 months ago. Personally I see no reason to currently buy more though.

No comments: