Wednesday 23 July 2014

Analysis of Enagas

Enagas, a Spanish gas company

Company: Enagas

ISIN ES0130960018 | WKN 662211   

Business: A Spanish gas company. Their pillars are the transport and storage of gas (three underground storages) and they own a large part of the entire gas pipelines (over 10,000 km) in Spain. They also run four regasification plants that converts liquefied natural gas (LNG) from -162 °C to atmospheric pressurised gas.

Active: Mainly Spain in Europe and since 2011 they have expanded into Mexico, Chile and Peru.

P/E: 14.0

Comment: This company looked much better on the screener and was there represented as having a P/E below 10. It is often that the screeners are not up to date with current affairs but as tradition holds. Once I make an analysis I also publish it online no matter what.

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

The P/E for Enagas is slightly above my liking with 14.0 and so is the P/B with 2.6 which in total gives us a negative response from Grahams old formula. The earnings to sales are excellent with 33% and are even better than what Gazprom has (see analysis of Gazprom). The ROE is also excellent with 18.9%! The book to debt is so, so with a ratio of 0.4.
In the last five years they had a yearly growth rate of 6.5% which is excellent! This then also gives us a motivated P/E of 19 to 22 which means that Enagas is today undervalued on the market.
They pay a very nice dividend of 5.4% but this does however correspond to over 75% of their earnings which I find very high.

Conclusion: Grahams gives Enagas the cold, moisturized hand and I also turn my back on them even thought the dividends are great and the ROE excellent. I think I would have preferred to invest in Gazprom instead.

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