Analysis of Enel 2015

Company: Enel

ISIN  IT0003128367 | WKN 928624

Business: An Italian energy and gas company. They have hydroelectric, thermoelectric, nuclear, geothermal, wind, solar and other renewable power plants. They also have the network not only for electricity but also for gas pipelines in large parts of Italy. 

Active: Present in over 30 countries. Heaviest involvement in Italy and Iberia.

P/E: 76.4

Here you can find the previous analysis of Enel 2014. 

Due to a poor result the P/E for Enel is up at 76.4 but the P/B is still good with 1.3. Graham does however give a no go to Enel. The earnings to sales are not something to impressed over since it is only 1% and the ROE is even worse with 1.6%. The book to debt ratio is down at 0.3 which is bad.
In the last five years they have had a very poor yearly revenue growth of 0.7% which gives us a motivated P/E of 8 to 10 which means that Enel is today highly overvalued on the market!
They pay a good dividend in the size of 3.3% but that correspond to over 250% of their earnings so they better get their earnings situation sorted out or they need to halt the dividend payments.

Conclusion: Graham says no and so do I. The P/E is too high and the ROE is too low and even though the dividend and P/B is great the ratio that they pay out from their earnings is simply too high for being sustainable in the long run. I will keep my shares in Enel but realise I must look a bit closer at it.

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