Thursday 27 February 2014

Analysis of Severn Trent

A UK water provider

Company: Severn Trent

Business: A UK water provider and waste water treatment company and are active with filtration and disinfection equipment to contract operations and analytical services for their customers.

Active: Strong focus UK, but are also active on Ireland, North America, South America, China, Egypt, Spain, Italy, China and Singapore.

P/E: 19.2

Comment: Another one that was shown as having a P/E of well below 10 in the screening program but did not according to my analysis.

contrarian values of P/E, P/B, ROE as well as dividend

The P/E for Severn Trent is far too high for my liking with 19.2 and the P/B is also at a level that makes me go yuck with 5.2. In total this gives a very clear no go from Grahams formula. The earnings to sales are however not so bad with 12% especially if we compare this with Veolia and the ROE is excellent with 27%. The book to debt is not so nice with a ratio of only 0.1 but it is similar to other competitors. In the last five years they have had a yearly growth of 2.2% which is so, so and this then gives us a motivated P/E of 9 to 13 which means that the company is over valued on the market today. They pay a nice dividend of 4.2% which represents almost 80% of their earnings so too much also here for me.

Conclusion: Neither Graham or I found this British company to be of any interest and I would probably even claim that the French Veolia would be, in comparison, more interesting to invest in.

If this analysis is outdated then you can request a new one.

No comments: