Friday, 21 June 2013

Analysis of Enel

An Italian power and gas company

Company: Enel

Business: Italian power 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.

Active: Strongest presence in Italy and generally Europe, another strong hub is in South America. In total they are present in 40 countries on 4 continents.

P/E: 29.7

The P/E is bad, bad, bad with almost 30 however the P/B is great with 0.7 which surprisingly gives us a buy according to Graham. What must be mentioned here is that last year was awful! The normal earnings are around 5 billion which would give a P/E of 5.2 and it would be a clear, clear buy. The earnings to sales are of course also bad with only 1%. The book to debt is acceptable with a ratio of almost 0.3. The growth has been good for the last five years with 6.8% per year. Which gives a motivated P/E of over 20 and considering that the "real" P/E is closer to 5 this seems to be a juicy company. Due to the bad year last year they stopped to my knowledge the dividends but otherwise with the normal earnings they would have paid out almost 10% in dividends and that would then only represent 50% of the earnings.

Conclusion: The company looks very interesting! It seems as if the company has been quadruple punished. Firstly because it is an energy company, secondly because it is Italian, thirdly because they had a bad year last year and finally because they stopped the dividends. I would have no problem to buy this stock today and hopefully enjoy a very nice dividend next year.

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