Saturday, June 3, 2017

Analysis of RWE 2017

Logo of RWE 2017

Company: RWE 

ISIN DE0007037129 | WKN 703712 

Business: A German electricity and gas company. RWE currently have three pillars that it stands on: Conventional Power Generation (production of electricity, gas and oil), Energy Trading (buying and selling of electricity, gas and oil) and finally Innogyn (subsidiary, the green energy daughter).

Active: Europe mainly.

P/E: -1.9

Here you can find the previous analysis of RWE 2016

Contrarian analysis of RWE 2017

The P/E of RWE is awful due to the mega loss in 2016 and therefore it is down at -1.9 and the P/B is also very bad with 3.9 which gives a clear no go from Graham. Earnings to sales and ROE are equally bad due to the loss. However the book to debt ratio is amazingly bad! It is looking like DB and is down at 0.04. Woow!
In the last five years they have had a yearly negative revenue growth of -3.0% which gives us a motivated P/E of 8 which means that RWE is today overvalued by the market.
They spend money on R&D which is good. They are not paying out any dividends which I generally do not like but for a company that are on the boarder of going towards negative equity then they better keep all the money that they can get hold of.

Conclusion: Graham says no and so do I. The P/E, P/B, ROE and dividends are all bad. The amount of debt that they have are staggering. In the share price we have seen a turnaround but in terms of the company, in my opinion, I have still not seen enough to convince me. I will therefore not invest any more money until I see that but I will however remains as a shareholder.

No comments: