Analysis of Iberdrola 2014

Company: Iberdrola

ISIN ES0144580Y14 | WKN A0M46B

Business: A Spanish energy provider. The Iberdrola Group is divided into four different business lines: Network Business (energy transmission and distribution), Wholesale & Retail Business (sale of energy to private and commercial customers), Renewable Energy Business (to over 95% wind power) and finally Other Businesses (engineering company for energy companies)

Active: Spain and to some extent also in the United Kingdom, the United States, Brazil and Mexico.

P/E: 13.5

Here you can find the previous analysis of Iberdrola.

The P/E for Iberdrola has become unpleasantly high for me with 13.5 but the P/B is good with 1.0 which then also gives at least from Graham a clear buy signal and since the share price has increased around +30% since he last recommended it I guess was fairly ok that time. The earnings to sales are ok with 8% but the ROE is too low for me with only 7.3%. The book to debt is ok with a ratio of 0.6.
In the last six years they have had a yearly growth rate of 4.5% which is great (however last years their revenue declined). This gives us a motivated P/E of 15 to 18 which means that Iberdrola is still today slightly undervalued by far from what it used to be.
They pay a very nice dividend of 4.9% which on the other hand is a so called flexible dividend (meaning you can decide upon cash or shares which means every dividend payment leads to share dilution) which I do not like and it also represents almost 66% of their earnings which I find too high.

Conclusion: Graham is still saying yes to Iberdrola and I do not really like it this time. The share price has already increased over 30%, the P/E and P/B has jumped up, the ROE is still bad and they keep up with their share dilution dividend system. So I will not go for Iberdrola any longer but I also see no reason to step out of Iberdrola if I would already have owned shares.

Due to the changes in comparison to last years analysis Iberdrola was kicked out of the Stocks of Interest live update list and will join the kicked out list as soon as I have managed to construct it...

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