Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Enel: Evaluating the Hype Behind Italy's Most Popular Stock

By Investing.com (Francesco Casarella)Stock MarketsMay 16, 2023 20:55
ph.investing.com/analysis/enel-evaluating-the-hype-behind-italys-most-popular-stock-169207
Enel: Evaluating the Hype Behind Italy's Most Popular Stock
By Investing.com (Francesco Casarella)   |  May 16, 2023 20:55
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
ENEI
-1.46%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ENLAY
-1.87%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ENEI
-1.38%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Enel is popular stock in Italy with a market cap of $67B.
  • The multinational energy company operates in electricity and gas sectors across Europe and Latin America.
  • Mixed performance, high debt, and unattractive valuations make the stock a poor long-term investment.

Enel (OTC:ENLAY) (ETR:ENEI), with a market capitalization exceeding $67 billion, is one of the most popular stocks in Italy. But what made this company such a prominent feature in the Italians' portfolios?

Using InvestingPro tools, we are going to take a look at Enel's fundamentals and try to identify the factors that make it a sought-after choice among Italian investors.

What Does the Company Do?

Enel is a multinational energy company that operates as a global integrated operator in the electricity and gas sectors, primarily focusing on Europe and Latin America. Its business segments encompass Italy, the Iberian Peninsula, Latin America, Eastern Europe, Renewable Energy, and Others.

Its divisions consist of Generation, Exchange, Infrastructure and Networks, Upstream Gas, and Renewable Energy. Enel's extensive reach extends across approximately 30 countries, spanning Europe, North America, Latin America, Africa, and Asia. With a net installed capacity of about 90 gigawatts (GW), Enel is a major player in the energy industry.

Enel's distribution companies facilitate the transportation of electricity through an extensive network encompassing over 1.9 million kilometers. The company operates diverse generating facilities across approximately 10 countries, serving cities like Rio de Janeiro, Bogota, Buenos Aires, Santiago de Chile, and Lima.

Using InvestingPro tools, we will try and analyze the company's financials. Readers can do the same for virtually every company or fund in the market just by clicking this link.

Enel's Fundamentals at a Glance

Let's start with the historical financial statements, which provide several useful insights.

Inconsistent trends in turnover and profits and declining margins are apparent. But, the last year is insignificant in terms of turnover considering how margins and profits fared.

Revenue Trend
Revenue Trend

Source: InvestingPro

Net Income Trend
Net Income Trend

Source: InvestingPro

Gross Profit Margins Trend
Gross Profit Margins Trend

Source: InvestingPro

Over the past 10 years, the growth rate of EPSd (diluted earnings per share) has been around 0.3 percent.

Balance Sheet and Cash Flows

Between cash and short-term investments, Enel has about $11.8 billion, for total current assets of around $70.7 billion. This, compared to current liabilities (about $81 billion), presents a very precarious short-term balance.

The Debt to Equity ratio isn't great either, at 1.8 (typical for utility companies anyway).

The operating cash flow has shown a significant decrease in the last two years, mirroring the net income trend. Before that, it was relatively stable.

Cash Flow Trend
Cash Flow Trend

Source: InvestingPro

The negative free cash flow indicates a lack of meaningful returns.

Valuations

Currently, the stock is trading at a discount of approximately 13% to its fair value, which is estimated to be around $7.8 per share based on an average of 13 different models, according to InvestingPro.

On the other hand, analysts are more optimistic, setting a target price of $7.62 with a potential upside of around 20%.

Fair Value Estimate
Fair Value Estimate

Source: InvestingPro

Given the overall uncertain and weak performance of key metrics, excessive debt, and unattractive valuations, I have decided to exclude the stock from my watchlist.

While the dividend yield of 3.43% is positive, I prefer to invest in financially stronger companies that also offer dividends, potentially even higher ones.

One can simply look at the price chart, which reveals a lackluster performance in the past years.

Enel Monthly Chart
Enel Monthly Chart

Analysis was done using InvestingPro. Access the tool by clicking on this link.

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counseling or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remain with the investor.

Enel: Evaluating the Hype Behind Italy's Most Popular Stock
 

Related Articles

Enel: Evaluating the Hype Behind Italy's Most Popular Stock

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email