Analysis of RWE

Company: RWE

Business: The second biggest electricity and gas company in Germany and the fifth biggest in Europe. They are producing their energy from gas, coal , nuclear and renewable. They divide themselves into five business unites: Production, Power and Heat Generation, Supply and Trading, Transmission and Distribution and finally Products and Services.

Active: In the European union.

P/E: 12.8

The P/E of RWE is pretty ok even though a little too high for me with 12.8 and the P/B is acceptable with 1.0 which gives a very clear buy according to Graham. The earnings to sales are very low with only 2% and the ROE is also low with only 8%. The book to debt is very low with its ratio of 0.2 which I do not like. In the last five years they have had a yearly growth of 4% which is not bad at all and this gives us a motivated P/E of around 13 to 17 which means that the market today is slightly undervaluing RWE. they pay an excellent dividend of almost 7.4% which on the other hand represents 94% of their earnings so I doubt they will manage to keep that up!

Conclusion: I would not buy RWE today but I understand people that buy them due to the very nice dividend. I do think that RWE has a more promising future than what it looks like right now and for that reason I will add also RWE to the stock of interest list with the next update.

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