Companhia Paranaense de Energia – COPEL Pfd B : Expensive but may be a safety

Companhia Paranaense de Energia – COPEL Pfd B relative valuation is now OVERVALUED. It was previously rated NEUTRAL, and has a fundamental analysis score of 71.

Our analysis is based on comparing Companhia Paranaense de Energia – COPEL Pfd B with the following peers – Centrais Eletricas Brasileiras SA-Eletrobras Pfd B, Cia Energetica de Minas Gerais Cemig CMIG Pfd and EDP – Energias de Portugal SA (XELTB-ES, XCMIG-ES and EDP-DE).

Relative Valuation

Companhia Paranaense de Energia – COPEL Pfd B’s price of EUR 9.59 is greater than CapitalCube’s implied price of EUR 6.96. At this level, CapitalCube believes that Companhia Paranaense de Energia – COPEL Pfd B is overvalued. Over the last 52 week period, the stock has fluctuated between EUR 9.25 and EUR 14.04.

Relative Valuation

Company Overview

  • Relative outperformance over the last year has faded more recently.
  • Companhia Paranaense de Energia – COPEL Pfd B trades at a lower Price/Book multiple (0.29) than its peer median (0.51).
  • The market expects XCOP-ES to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • XCOP-ES‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • XCOP-ES‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While XCOP-ES‘s revenues in recent years have grown faster than the peer median, the market gives the stock a PE ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of capital investment seems appropriate to support the company’s growth.

Investment Outlook

Companhia Paranaense de Energia – COPEL Pfd B has a fundamental score of 71 and has a relative valuation of OVERVALUED.

Companhia Paranaense de Energia – COPEL Pfd B appears on the top right hand quadrant of CapitalCube’s Value – Price Matrix. We classify this as ‘Safety’. In other words, Companhia Paranaense de Energia – COPEL Pfd B has a relatively high Fundamental Analysis score of 71, while being potentially overvalued and trading higher than its CapitalCube Implied Price of 6.96. There might be some safety in this stock where it’s fundamental strength perhaps justifies its relatively higher price.

Fundamentals Vs Relative Valuation

Drivers of Valuation

The market expects XCOP-ES to maintain the median rates of return it generates currently.

The market expects XCOP-ES to grow at about the same rate as its chosen peers (PE of 3.21 compared to peer median of 3.21) and to maintain the peer median return (ROE of 9.30%) it currently generates.

The company trades at a lower Price/Book multiple of 0.29 compared to its peer median of 0.51.

Valuation Drivers

XCOP-ES has maintained its median ROE and PE profile from the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Companhia Paranaense de Energia engages in the generation, transmission, distribution and sale of electricity. The company also provides telecommunications and other services. It operates through five business segments: Power Generation and Transmission, Power distribution and Sales, Telecommunications, Gas and Holding Company. The Power Generation and Transmission segment comprises the generation of electric energy from hydraulic, wind, and thermal projects, the transport and transformation of the power generated by the company, and the construction, operation, and maintenance of all power transmission substations and lines. The Power Distribution and Sales segment comprises the distribution and sale of electric energy, the operation and maintenance of the distribution infrastructure, and related services. The Telecommunications segment comprises telecommunications and general communications services. The Gas segment comprises the public service of piped natural gas distribution. The Holding Company segment comprises participation in other companies. Companhia Paranaense de Energia was founded on October 26, 1954 and is headquartered in Curitiba, Brazil.

Disclaimer

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