Enel SpA – Value Analysis (MILAN:ENEL) : December 21, 2017

Capitalcube gives Enel SpA a score of 44.

Our analysis is based on comparing Enel SpA with the following peers – Terna S.p.A., Endesa S.A., Fortum Oyj, ENGIE SA, RWE AG, E.ON SE and Iberdrola SA (TRN-IT, ELE-ES, FORTUM-FI, ENGI-IT, RWE-IT, EOAN-IT and IBE1-DE).

Investment Outlook

Enel SpA has a fundamental score of 44 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It’s current Price/Book of 1.02 is about median in its peer group.
  • The market expects faster earnings growth from ENEL-IT than from its peers and also a turnaround in its current ROE.
  • ENEL-IT has relatively low profit margins and median asset efficiency.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • ENEL-IT‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • 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.
  • Compared with the peers chosen, ENEL-IT has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s capital investment seems appropriate for a business with peer median returns.
  • ENEL-IT seems to be constrained by the current level of debt.

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Leverage & Liquidity

ENEL-IT is debt-constrained.

  • With debt at a relatively high 44.25% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 45.41%), and interest coverage level of 2.37x, ENEL-IT seems debt-constrained.
  • All 7 peers for the company have an outstanding debt balance.

ENEL-IT has moved to a relatively high leverage from an Some Capacity profile at the recent year-end.

  • ENEL-IT‘s interest coverage is its lowest relative to the last five years and compares to a high of 3.30x in 2016.
  • The decrease in its interest coverage to 2.37x from 3.30x (in 2016) was also accompanied by a decrease in its peer median during this period to 2.83x from 3.35x.
  • ENEL-IT‘s debt-EV is its lowest relative to the last five years and compares to a high of 66.15% in 2012.
  • Like the interest coverage trend, the decrease in its debt-EV (to 44.25% from 52.09%) was also accompanied by a decrease in its peer median during this period (to 45.41% from 53.59%).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Terna S.p.A. 48.64 0.59 9.88 12.35
Endesa S.A. 23.72 0.79 9.92 43.83
Fortum Oyj 31.39 3.02 3.55 18.92
ENGIE SA 66.44 1.06 3.3 19.39
RWE AG 76.44 1.13 1.55 -8.9
E.ON SE 44.48 1.05 -2.08 42.72
Iberdrola SA 46.33 0.78 2.2 19.96
Enel SpA 44.25 0.85 2.37 22.03
Peer Median 45.41 0.95 2.83 19.67
Best In Class 23.72 3.02 9.92 43.83

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Company Profile

Enel SpA operates as an holding company, which engages in the distribution of electricity and gas. It operates through the following segments: Italy, Iberian Peninsula, Latin America, Eastern Europe, Renewable Energy, and Others. The company was founded on December 6, 1962 and is headquartered in Rome, Italy.

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