Enel SpA – Value Analysis (XETRA:ENL) : October 6, 2017

Capitalcube gives Enel SpA a score of 38.

Our analysis is based on comparing Enel SpA with the following peers – Iberdrola SA, Endesa S.A., Fortum Oyj, E.ON SE, CEZ as, EDP-Energias de Portugal SA and Terna S.p.A. (IBE1-DE, ENA-DE, FOT-DE, EOAN-DE, CEZ-DE, EDP-DE and TRN-IT).

Investment Outlook

Enel SpA has a fundamental score of 38 and has a relative valuation of UNDERVALUED.

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’s current Price/Book of 0.99 is about median in its peer group.
  • The market expects faster earnings growth from ENL-DE than from its peers and also a turnaround in its current ROE.
  • ENL-DE has relatively low net profit margins while its asset efficiency is relatively high.
  • 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.
  • ENL-DE‘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 median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While ENL-DE‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • ENL-DE seems to be constrained by the current level of debt.

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Leverage & Liquidity

ENL-DE is debt-constrained.

  • With debt at a relatively high 49.79% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 47.39%), and interest coverage level of 2.19x, ENL-DE seems debt-constrained.
  • All 7 peers for the company have an outstanding debt balance.

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

  • ENL-DE‘s interest coverage is its lowest relative to the last five years and compares to a high of 3.30x in 2016.
  • Though its interest coverage decreased to 2.19x from 3.30x (in 2016), its peer median remained relatively stable during this period at 2.93x.
  • Interest coverage fell 0.66 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • ENL-DE‘s debt-EV is its lowest relative to the last five years and compares to a high of 66.15% in 2012.
  • The decrease in its debt-EV to 49.79% from 52.09% (in 2016) was also accompanied by a decrease in its peer median during this period to 47.39% from 51.14%.
  • Relative to peers, debt-EV rose 1.45 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Iberdrola SA 42.94 0.81 2.19 19.96
Endesa S.A. 22.4 0.76 9.13 45.59
Fortum Oyj 37.65 3.49 3.66 16.88
E.ON SE 70.75 0.93 0.14 47.64
CEZ as 46.14 1.1 4.9 30.46
EDP-Energias de Portugal SA 60.93 1.1 1.81 10.57
Terna S.p.A. 48.64 0.59 9.88 12.35
Enel SpA 49.79 0.87 2.19 18.19
Peer Median 47.39 0.9 2.93 19.07
Best In Class 22.4 3.49 9.88 47.64

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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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