Alstom SA – Value Analysis (EURONEXT PARIS:ALO) : December 26, 2017

Capitalcube gives Alstom SA a score of 63.

Our analysis is based on comparing Alstom SA with the following peers – Vergnet S.A., Touax SA and Siemens Gamesa Renewable Energy, S.A. (ALVER-FR, TOUP-FR and SGRE-ES).

Investment Outlook

Alstom SA has a fundamental score of 63 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (2.04).
  • ALO-FR‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • ALO-FR has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • ALO-FR‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While ALO-FR‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • ALO-FR has additional debt capacity.

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Leverage & Liquidity

ALO-FR has additional debt capacity.

  • With debt at a reasonable 25.61% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 24.51%), and a well-cushioned interest coverage level of 5.95x, ALO-FR has the capacity to borrow some more.
  • All 3 peers for the company have an outstanding debt balance.

ALO-FR has moved to a relatively high liquidity from a Limited Flexibility profile at the prior year-end.

  • ALO-FR‘s interest coverage is upward trending and is above (but within one standard deviation of) its four-year average interest coverage of 4.33x.
  • The increase in its interest coverage to 5.95x from 1.63x (in 2016) was also accompanied by an increase in its peer median during this period to 3.40x from 0.84x.
  • Interest coverage rose 1.76 points relative to peers.
  • ALO-FR‘s debt-EV is its lowest over the last four years and compares to a high of 59.51% in 2014.
  • The decrease in its debt-EV to 25.61% from 50.18% (in 2016) was also accompanied by a decrease in its peer median during this period to 24.51% from 32.51%.
  • Relative to peers, debt-EV fell 16.57 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Vergnet S.A. 23.41 1.07 -6.27 -78.49
Touax SA 78.95 0.63 0.84 10.74
Siemens Gamesa Renewable Energy, S.A. 9.99 1.05 12.9 75.53
Alstom SA 25.61 1.06 5.95 20.35
Peer Median 24.51 1.05 3.4 15.55
Best In Class 9.99 1.07 12.9 75.53

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Company Profile

Alstom SA engages in the provision of power generation, power transmission and rail infrastructure. Its products include bogies, traction systems, electrification, track laying, and urban integrated solution. It also offers services such as parts and repairs, maintenance, modernisation, and support services. The company was founded in 1989 and is headquartered in Saint-Ouen, France.

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