Eni SpA – Value Analysis (LONDON:0N9S) : December 26, 2017

Capitalcube gives Eni SpA a score of 59.

Our analysis is based on comparing Eni SpA with the following peers – QEP Resources, Inc., Questerre Energy Corporation Class A, Royal Dutch Shell Plc Class A and Prospex Oil and Gas Plc (Q8Q-DE, QEC-NO, R6C-DE and PXOG-GB).

Investment Outlook

Eni SpA has a fundamental score of 59 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It’s current Price/Book of 1.09 is about median in its peer group.
  • 0N9S-GB‘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.
  • 0N9S-GB has a successful operating model with relatively high net profit margins and asset turns.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • 0N9S-GB‘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 0N9S-GB‘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 level of capital investment is relatively low and suggests it is milking the business.
  • 0N9S-GB seems too levered to raise additional debt.

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Leverage & Liquidity

0N9S-GB would seem to have a hard time raising additional debt.

  • With debt at a relatively high 41.84% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 34.67%), and relatively tight interest coverage level of 0.62x, 0N9S-GB would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • Of the 4 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include PXOG-GB.

0N9S-GB has moved to a Limited Flexibility from an Some Capacity profile at the recent year-end.

  • 0N9S-GB‘s interest coverage is its lowest relative to the last five years and compares to a high of 15.04x in 2012.
  • The decrease in its interest coverage to 0.62x from 3.08x (in 2016) was also accompanied by a decrease in its peer median during this period to 0.62x from 1.85x.
  • Interest coverage fell 1.23 points relative to peers.
  • 0N9S-GB‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 36.63%.
  • The increase in its debt-EV to 41.84% from 39.86% (in 2016) was also accompanied by an increase in its peer median during this period to 34.67% from 32.29%.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
QEP Resources, Inc. 61.3 1.55 -0.78 29.72
Questerre Energy Corporation Class A N/A 0.74 -4.07 35.36
Royal Dutch Shell Plc Class A 27.5 1.23 4.13 42.66
Prospex Oil and Gas Plc 0 14.6 No interest exp 999
Eni S.p.A. 41.84 1.27 0.62 30.87
Peer Median 34.67 1.27 0.62 35.36
Best In Class 27.5 14.6 No interest exp 999

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Company Profile

Eni SpA is engaged in the exploration and production of oil and natural gas, processing, transportation, and refining of crude oil, transport of natural gas, storage and distribution of petroleum products, and the production of base chemicals, plastics and elastomers. It operates through the following business segments: Exploration and Production, Gas and Power, Refining & Marketing and Chemicals, Engineering and Construction, and Others. The Exploration and Production segment engages in the exploration, development and production of oil and natural gas. The Gas and Power segment engages in the supply, trade, and marketing of gas and electricity. The Refining & Marketing and Chemicals segment engages in refining and marketing of petroleum products in Italy. The Engineering and Construction segment engages in engineering, oilfield services and construction of both offshore and onshore for oil and gas industry. The Others segment provides production plants by business and related facilities. The company was founded on February 10, 1953 and is headquartered in Rome, Italy.

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