Monday 27 April 2020

Analysis of E.On. 2020

Logo of E.On 2018

Company: E.On 


Business: A German energy provider and electricity producer. They now no longer claim any business units but are instead referring to the various countries that they are active in with lists of the companies they have in each country.

Active: They are present in several countries in Europe.

P/E: 14.7

Here you can find the previous analysis of E.On. 2017

The P/E of E.On is looking fairly high with 14.7 and the P/B is equally not the best at 2.5 which gives a no go from Graham. The earnings to sales are at 5% and the ROE is fairly high with 17.3%. The book to debt ratio is very low with 0.11.

In the last four years, after they went green, they have had a yearly growth rate of 1.2% this gives us a motivated P/E of around 10 which means that E.On. is overvalued by the market right now. 

They pay an acceptable dividend of 5.3% which corresponds to 77% of the earnings so they better start pushing up those earnings!

Future: Mankind will for the foreseeable future require electricity. In the future it will come less from fossil (oil, coal, gas) and more from a broad portfolio of renewables up until, finger crossed, we solve fusion. There are several electricity trading companies that are pinching customers since many years and the big oil giants are stepping more and more into renewable energy. Who the winner will be I can today not say.

Conclusion: Graham says no and so do I. I will not invest any further money into E.On. at this point in time.

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