Saturday 5 April 2014

Analysis of Alstom


A French energy supplier

Company: Alstom

Business: A French supplier of energy solutions and services. They are divided into three groups: Power (power generation equipment for nuclear, coal, etc. plants as well as wind, hydro and geothermal), Transport (high speed trains with signalling infrastructure etc.) and finally Grid (smart grids and super grids containing current substations from medium up to ultra high voltage).

Active: Based on tradition main focus has been France but today they are present in 100 countries world wide on each continent.

P/E: 8.4

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

The P/E of Alstom is great with 8.4 and the P/B is semi ok with 1.4 which gives according to Graham a very clear buy. Their earnings to sales are at 4% which is so, so but the ROE is pretty good with 16%. The book to debt I do not like at all with its ratio of 0.2. In the last five years they have grown only 1.6% yearly so inflation but that's it! This then gives us a motivated P/E of 9 to 12 which means that Alstom is only slightly undervalued on the market today. They pay an ok dividend of 3.8% which on the other hand only represents 32% of their earnings so they should manage to keep that up.

Conclusion: For Graham this company is a very clear buy and I also think that the future will be good for them. In the last couple of days due to the news about wind power they have significantly jumped up in price from when I first looked at them. Personally I will however not buy this company since I find that there are plenty of other more interesting companies out there that are showing nice growth that the market have yet to acknowledge them for.

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