I already mentioned that I was in a stock hunting mood as I am restructuring my portfolio. I’ll soon have another $5,000 to invest and I wish to buy 2 more stocks for now. So it is time for another Stock Analysis! Just so you know, I’ll be sending the stats of all the stocks on my radar list via my newsletter this week. I fear that I won’t have time to analyze all of them right away so I thought of sharing my numbers with you ;-). So the first stock to be analyzed is ETF: Entergy Corp.
The Company Stock Description:
Entergy is an integrated electricity provider offering its services to 2.7M people in 4 southern states (Alabama, Louisiana, Mississippi and Texas). Entergy is mainly active in nuclear energy production and is one of the biggest nuclear power generators in the USA. They are also active in the natural gas sector as well. Part of the sustainable dividend portfolio I created, Entergy is known for his ethics and values along with a shareholder friendly management team.
Stock Graph (click on image for larger graph)
The Company Ratios and Financial Info:
Dividend Metrics:
– Current Dividend Yield: 4.13%
– 5 year Dividend Growth : 8.45%
– 1 year Dividend Growth : 8.00%
Company Metrics :
– Sales Growth: 4.28%
– Earnings Growth: 10.03%
– P/E Ratio: 9.68
– Margin Growth: 2.92%
– Payout Ratio: 46.86%
– Return on Equity: 14.85%
– Debt to Capital Ratio: 0.77
Stock Metrics:
– Ticker: ETR
– Price: 73.03
– Trading Volume: 1,532,045
– Trend (technical analysis): Trading below moving average.
Upcoming opportunities and dangers:
Entergy has been in a slump after being downgraded from “Outperform” to “Sector Perform” by Wells Fargo and from “Buy” to “Neutral” by JP Morgan, Morgan Stanley, UBS and many others. In fact, ETF has dropped 5.5% in price in the past 13 weeks or so.
Nevermind the good P/E Ratio and good cash flow position, those analysts don’t like the fact that ETR has one of the lowest (read negative) EBITDA growth (-12%). EBITDA Growth can be valuable in predicting future cash flow generation and earnings power.
In my opinion, I believe nuclear power will be on a rising trend in the years to come. We now have the technology to manage it and are desperately seeking ways to create clean and affordable energy. Nuclear power is far from being a perfect solution but if you can’t use hydro, solar or wind energy, you might look into nuclear. One thing is for sure, we all need energy and this won’t stop tomorrow.
Final Thoughts on ETR
It’s hard to make a call on ETR as we have counter indicators. On one side, we have colder financial analysts but they are not in panic mode either. Sales growth is not too impressive and I think that future growth won’t be too spectacular. On the other hand, we have a stock trading under its moving average, with a low dividend payout ratio and P/E ratio…and good dividend yield. So I’m not convinced I’ll add ETR in my portfolio. It seems to be a good stock for a steady dividend payment but I doubt it see any growth in the stock value at the moment…
What is your analysis of ETR?
disclaimer: I do not hold ETR
Interesting… if the EBITDA is dropping but earnings are increasing it would seem that some of the other expenses are falling; maybe they’re reducing debt, or depreciation is falling as they get rid of old assets; I’m not sure if it would be possible for taxes to drop enough on lower profits to drive an increased profit like that.
If it is from a reduction in debt that could be a good sign; I know from my own business that letting the top line slow down while you focus on what’s happening at the end can actually give you stable profits while you clean up (with higher margins/lower expenses) and then give you a platform for better growth once you’re ready.
However a large business like this would clearly need a lot more debt than mine so a reduction in debt could easily go too far and cripple it.