The stock of Engie SA (OTCPK:ENGIY, 30-year Financials) appears to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $14.355 per share and the market cap of $34.7 billion, Engie SA stock appears to be fairly valued. GF Value for Engie SA is shown in the chart below.
Because Engie SA is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which is estimated to grow 1.27% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Engie SA has a cash-to-debt ratio of 0.36, which which ranks in the middle range of the companies in the industry of Utilities - Regulated. The overall financial strength of Engie SA is 4 out of 10, which indicates that the financial strength of Engie SA is poor. This is the debt and cash of Engie SA over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Engie SA has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $65.3 billion and loss of $0.846 a share. Its operating margin is 6.66%, which ranks worse than 70% of the companies in the industry of Utilities - Regulated. Overall, the profitability of Engie SA is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of Engie SA over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Engie SA is -2.5%, which ranks worse than 79% of the companies in the industry of Utilities - Regulated. The 3-year average EBITDA growth rate is 3.4%, which ranks in the middle range of the companies in the industry of Utilities - Regulated.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Engie SA's ROIC was 14.73, while its WACC came in at 6.52. The historical ROIC vs WACC comparison of Engie SA is shown below:
In conclusion, Engie SA (OTCPK:ENGIY, 30-year Financials) stock appears to be fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the middle range of the companies in the industry of Utilities - Regulated. To learn more about Engie SA stock, you can check out its 30-year Financials here.
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