Gas Plus S.p.A.: Buy/ Sell depends on fundamentals

Gas Plus S.p.A. relative valuation is now NEUTRAL. It was previously rated OVERVALUED, and has a fundamental analysis score of 28.

Our analysis is based on comparing Gas Plus S.p.A. with the following peers – ACSM-AGAM S.p.A., Snam S.p.A., Ascopiave s.p.a. and Enel S.p.A. (ACS-IT, SRG-IT, ASC-IT and ENEL-IT).

Relative Valuation

Gas Plus S.p.A. is currently neutrally valued, as its previous close of EUR 3.93 lies within the CapitalCube estimate range of EUR 3.87 to EUR 4.62. Over the last 52 week period, Gas Plus S.p.A. has fluctuated between EUR 3.38 and EUR 4.92.

Relative Valuation

Company Overview

  • Relative underperformance over the last year and the last month suggest a lagging position.
  • Gas Plus S.p.A.’s current Price/Book of 0.85 is about median in its peer group.
  • The market expects faster earnings growth from GSP-IT than from its peers and also a turnaround in its current ROE.
  • GSP-IT employs relatively high amounts of assets while generating relatively median profit margins.
  • Changes in annual earnings are in line with its chosen peers but lags in terms of revenue, implying the company is cost conscious and selective about spending for growth.
  • GSP-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.
  • Company appears to give away relatively high gross margins to relatively high operating costs suggesting a differentiated product portfolio with low pre-tax margins relative to peers.
  • While GSP-IT‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median PE ratio and may be factoring in some sort of a strategic play.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • GSP-IT seems too levered to raise additional debt.

Investment Outlook

Gas Plus S.p.A. has a fundamental score of 28 and has a relative valuation of NEUTRAL.

Gas Plus S.p.A. lies at the bottom left quadrant of CapitalCube’s Value – Price Matrix. We call this space a Value Trap. At this level, Gas Plus S.p.A. is potentially undervalued, since it trades lower than its CapitalCube Implied price of 4.24. However, its fundamental analysis score is also on the lower side at 28, begging the question whether the low price is on account of the weaker fundamentals.

Fundamentals Vs Relative Valuation

Drivers of Valuation

GSP-IT has a Turnaround profile relative to its peers.

The market expects GSP-IT to grow faster than the median of its chosen peers (PE of 32.34 compared to peer median of 17.52) and to improve its current ROE of 2.64% which is below its peer median of 3.32%. Thus, the market seems to expect a turnaround in GSP-IT‘s current performance.

The company’s current Price/Book of 0.85 is about median in its peer group.

Valuation Drivers

GSP-IT has moved to a Turnaround from a median ROE and PE profile at the recent year-end.

ROE % (On Common Equity)
 

Peer Analysis

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

Company Profile

Gas Plus SpA engages in the exploration, production and distribution of natural gas. The company operates through the following business units: Exploration and Production, Supply and Sales, Retail, and Network. Its activities include natural gas value chain, particularly in the exploration and production, purchase, distribution and sale to wholesale and final customers. The company was founded in 1960 and is headquartered in Milan, Italy.

Disclaimer

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