Friday, May 22, 2015

Analysis of RWE 2015


RWE, a German electricity and gas company

Company: RWE

ISIN DE0007037129 | WKN 703712  

Business: A German electricity and gas company. This fifth largest electricity producer in EU are using the entire mixture of gas, coal, nuclear and renewable for the production. RWE currently run five business unites: Production (lignite, gas and oil), Power Generation (the generated electricity from all the different sources), Supply & Trading (buying and selling of electricity, gas and oil), Transmission & Distribution (electricity, gas and water grids) and finally Products & Services (sales of electricity to residential and commercial customers). 

Active: Europe, North Africa and Turkmenistan. I have also received RSS feeds informing me that they are stepping into the middle east also.

P/E: 8.1

Here you can find the previous analysis of RWE 2014

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

The P/E of RWE is excellent with 8.1 and the P/B is also great with 1.2 which gives a very clear buy from Graham! Earnings to sales I find to be ok with 4% and the ROE is good with 14%. The book to debt ratio is not very nice though with 0.2.
In the last five years they have had a yearly revenue growth of -1.9% which is awful and this then gives us a motivated P/E of around 8 to 10 which means that RWE is today fairly valued by the market.
They pay a very nice dividend in the size of 4.5% which correspond to 36% of their earnings so at least they should be able to keep this level.

Conclusion: Graham says yes and so did I since I bought them this spring. Since the previous analysis the share price has dropped with around -35% and that was enough for me to decide to step in as a shareholder since the P/E, P/B, ROE and dividend are all great! The energy companies have a lot of problems and will continue to have so for maybe years to come but the worlds need for electricity will in the future strongly increase and only how it is produced will change over time. Look at lawnmowers as an example. They went from manual, to using petrol to now automatic robotics running on electricity.

If this analysis is outdated then you can request a new one.

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