Saturday, May 27, 2017

Analysis of Enel 2017

Logo of Enel 2017

Company: Enel 

ISIN IT0003128367 | WKN 928624 

Business: An Italian energy and gas company. They have hydroelectric, thermoelectric, nuclear, geothermal, wind, solar and other renewable power plants. They also have the network not only for electricity but also for gas pipelines in large parts of Italy. 

Active: Present in over 30 countries. Heaviest involvement in Italy and Iberia. 

P/E: 21.7

Here you can find the previous analysis of Enel 2016

Contrarian analysis of Enel 2017

The P/E of ENel is too high with 21.7 and the P/B is also on the high side with 1.3 which gives a no from Graham. The earnings to sales are so, so with 3% and the ROE is horrible with only 6.2%. The book to debt ratio is also not very nice with 0.4.
In the last five years they have had a negative yearly revenue growth of -3.6% which is bad and this then gives a motivated P/E of 8 which means that the stock market is highly overvaluing Enel at the moment.
They Pay a nice dividend in the size of 3.9% which on the other hand correspond to 83% of their earnings so they better start increasing those earnings.

Conclusion: Graham says no to Enel and so do I. The P/E, P/B is too high, the ROE is too low and the dividend %-age versus earnings are also poor! Enel did not have a bad year on top of this they are up at a P/E of 21 and yet one should not forget that energy prices for the last two to three years have been bad. I am thinking that maybe I should sell off my shares in Enel by the look of things... on the other hand... RWE, E.On. and Uniper had all losses and the result from Cez is not spectacular either so the fact that Enel is doing pretty good in these world market conditions is indeed impressive and it should be awarded by me remaining as a shareholder.

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