Wednesday 6 April 2016

Analysis of RWE 2016

Company: RWE 

ISIN DE0007037129 | WKN 703712 

Business: A German electricity and gas company. RWE currently run four business unites: Power & Heat 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 mainly.

P/E: -40.7 (P/E5: 18.4)

Here you can find the previous analysis of RWE 2015

The P/E for RWE is awful with -40.7 and the P/E is also high with 18.4. The P/B is however excellent with 0.8 but still we get a no go from Graham due to the losses.
We get no reasonable values out from earnings to sales or ROE but the book to debt ratio is very low with 0.13 which is bad and it has even become worse since last year.
In the last five years they have had a yearly revenue growth rate of -1.2% which is bad and this then gives us a motivated P/E of 8 and at least compared to the P/E5 one could say that RWE is overvalued by the market today.
They correctly decided to cut the dividends which of course was not appreciated neither by the market nor by me but it was a must so one can not say too much about it.

Conclusion: Graham says no to RWE and I say to observe it and to read the quarter reports. Once the turn around arrives that would be the good moment to step in even if you might pay a couple of %-age points more at that stage it will be worth it. I do not see when the turn around will come but I doubt it will happen within the next year. I am a shareholder today and I will remain as a grumpy one for the time being.

If this analysis is outdated then you can request a new one.

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