Tuesday 18 February 2014

Analysis of BKW Energy

A Swiss energy producer and distributor

Company: BKW Energy

Business: A Swiss energy company that covers all stages of energy supply: from production and transmission to trading and distribution. They have a total of one million customers that receive their energy from a mixture of hydroelectric and nuclear power plants, gas-fired combined-cycle power plants as well as renewable energy.

Active: Switzerland (main part), Germany, Italy and to a small part in France.

P/E: 11.6

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of BKW Energy is acceptable with 11.6 and the P/B is excellent with 0.6 which gives us a very clear buy signal according to Graham. The earnings to sales are at 5% which is much better than both E.On. as well as RWE. The ROE is however not so good with only 4.9%. In the last five years they have had a negative revenue growth of -3.9% yearly which gives us a motivated P/E of around 8 to 10 which means that the shares are fairly valued today. They pay a very nice dividend of 4.1% which represents 48% of their earnings so they should be able to keep that up.

Conclusion: Graham finds that it is a buy (like many energy companies today) and I find it ok for sitting and collecting a nice dividend but that would also be all. Still the P/E, P/B and dividend is great so I fully understand if someone wants to step into this company but it is not for me.

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