Friday, March 18, 2016

Analysis of E.On 2016

E.On, a German energy provider

Company: E.On 


Business: A German energy provider and electricity producer. They are still claiming to have ten different business areas: Renewable Energy, Conventional Generation, Energy Efficiency, Exploration & Production, Gas Supply, Gas Storage & Transport, Trading, Distribution, Sales and finally Technical Services. Uniper exists as a individual company but the separation has still not been completed and what they offer is (Power Generation, Global Commodities, Energy Storage, Energy Sales, Third Party Services and Engineering Services).

Active: They are present in several countries in Europe as well as in Russia and in Brazil. 

P/E: -2.4 (P/E5: also negative!) 

Here you can find the previous analysis of E.On. 2015

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

The P/E of E.On is awful with -2.4 due to impairment costs among other things what is worse is that the P/E5 is also negative. The P/B is ok with 1 but there are still more write-downs that can be made. Graham gives a direct no go on this one.
Earnings to sales and ROE are of course meaning less due to the losses but the book to debt ratio is not very nice with 0.2.
In the last five years they have had a yearly revenue growth rate of 0.4% which is very bad and this then gives a motivated P/E of 8 which to me means that E.On is today overvalued by the market.
They pay a crazy dividend of 5.9% which is probably due to the fear of institutional investors since what they actually should do would be to cut it completely so sort out the shop.

Conclusion: Graham says no to E.On and so do I. They are now booking so much losses that even when looking for an as long period as five years a total loss is observed. This is bad. Despite of all this they still pay a dividend which really shows that a coward the CEO is. I would not be surprised if they once again will offer it in the form of shares. Last year over 30% accepted that offer. E.On / Uniper will have to show a couple of good quarters before I see any interest in making any further investments in them. I will remain a grumpy shareholder in E.On.

If this analysis is outdated then you can request a new one.

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