Thursday 20 June 2013

Analysis of EDF

A French energy company

Company: EDF

Business: French energy company which means that their main, main focus is on nuclear energy but they also have solar, wind and hydro.

Active: Almost all over Europe, in the US, Brazil, Thailand and South Africa.

P/E: 10.3

The P/E for the EDF group is looking good with 10.3 to this we add a P/B of 1.3 and we get according to Graham a very clear buy. The earnings to sales are even lower that for Iberdrola and is only 5% and they book to debt is a bit of a concern to me because it is dangerously close to what banks are running. The growth for the last five years has been 2.5% which is definitely more than the inflation that they have had in France. This gives a motivated P/E of around 12 to 13. Which means that the market has priced EDF fairly well. They as almost all of the energy companies are paying excellent dividends and in this case it is 6.7% which represents 70% of their earnings so a bit too much in my opinion.

Conclusion: Graham says buy but I would be a bit careful with this company. There are better ones so I see no reason to buy this one today even though it would be acceptable to do so. I would favour Fortum or Iberdrola.

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