Alstom shares: Price analysis before buying or selling

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ISIN code: FR0010220475

Ticker: EPA: ALO

Index or market: CAC 40

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Elements to consider before selling or buying Alstom shares

Analysis N°1

In particular, it will be necessary to monitor the growth of the renewable energy market, which may have a greater or lesser influence on Alstom's demand in the future.

Analysis N°2

The diversification of the group's activities with the acquisition of companies in various sectors should also be carefully analysed and could allow it to diversify its revenues.

Analysis N°3

Another indicator could be the ageing of the power plant fleet, which would lead to higher demand and therefore more revenue for the group.

Analysis N°4

Of course, the competition in this sector will also have to be closely monitored, particularly with regard to power components.

Analysis N°5

The international regulation of this sector of activity and the changes issued by governments in this area are also indicators to be followed closely.

Analysis N°6

As Alstom's business is strongly linked to global economic growth, international economic figures should be followed with interest.

Analysis N°7

Of course, you should also closely monitor the various strategic partnerships that Alstom may set up to boost its growth in the more or less long term.

Analysis N°8

Finally, you should take note of the group's financial results by comparing them to the results of previous years and to analysts' expectations.

Analysis before buying or selling Alstom shares

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General presentation of Alstom

Before you buy or sell Alstom shares, we offer you a little more information about the Alstom Group and its detailed activities. This information will help you to better understand how this company may evolve in the longer term.

The Alstom Group is a French company specialising in the railway infrastructure sector. More specifically, it is now one of the world's leading manufacturers of infrastructure for the railway sector.

To better understand the activities of the Alstom group, it is possible to divide them into different segments according to the share of turnover they generate and in this way:

The rolling stock segment with trains, trams and locomotives generates the largest share of the company's sales with 48.1% of turnover.
The next largest segment is signalling, information and control systems, which generate 18.1% of turnover.
Railway services activities generate nearly 17.9% of the company's turnover and include maintenance, modernisation, spare parts management, technical support and assistance.
Finally, the remaining 15.9% of turnover comes from railway infrastructure, including track-laying infrastructure, electrical power supply systems, electromechanical equipment or telecommunication and passenger information systems in stations, automatic ticket machines, escalator access, lifts for the disabled, automatic platform doors, ventilation, air conditioning and lighting systems.

It is also interesting to know the geographical distribution of the group's turnover, which currently generates 19% of its turnover in France, 38% in the rest of Europe, 16.6% in the Middle East and Africa, 15.6% in the Americas and 10.8% in Asia-Pacific.

Alstom's share price is currently listed on compartment A of the Euronext Paris market in France. Alstom is still part of the French national CAC 40 index.

Photo credits: ©badboo/123RF.COM

The major competitors of Alstom

Now that you are fully familiar with the activities of the Alstom group, we suggest that you discover its main competitors and adversaries in its sector of activity with a presentation of the main players in the sector.

Siemens Mobility

First of all, the Siemens Mobility group is of course one of Alstom's direct competitors. This is a subsidiary of the Siemens group which specialises in the design and marketing of metro automation systems. Its headquarters are located in Munich in Bavaria. However, it should be noted that in 2017, Siemens Mobility almost merged with the Alstom group. Indeed, a merger project had been filed by Alstom and was to be finalised in 2018 to create a new entity under the name Siemens-Alstom. But two years later, in February 2019, the European Commission finally rejected the merger between these two companies.

CAF

Another direct competitor of the Alstom group is CAF or Construcciones y Auxiliar de Ferrocarriles. This is a Spanish railway manufacturer based in Beasain in the Basque Country. This group designs and produces several types of products for this industry, such as wagons, railway cars, locomotives and even variable gauge axles.

Stadler

The Swiss Stadler group is next. This manufacturer is also specialised in the production of railway rolling stock, especially regional and commuter trains. More specifically, the Stadler group does not directly offer a range of ready-to-use rail vehicles, but rather modular platforms that it adapts to the needs of its customers.

Hyundai Rotem Company

Finally, the last serious and important competitor of Alstom is the Hyundai Rotem Company, also known as Hyndai Rotem and formerly known as KOROS for Korea Rolling Stock Corporation. The company specialises in the manufacture of railway rolling stock and armaments. Its headquarters are located in South Korea. The Hyundai Rotem Group was created in 1999 by the union of three companies specialising in the manufacture of rolling stock and took its current name a little later, in 2007. Of course, it is a subsidiary of the Hyundai Motor Group.

The major partners of Alstom

The Alstom Group has gained parts of the market through its association with other large companies worldwide. To better understand how it operates its alliance strategy here are some examples of the company’s recent partnerships.

SNCF

In 2016 Alstom and the SNCF formed an innovative partnership to create a new generation TGV.

Bouygues

The Bouygues Company also became a partner of Alstom through the acquisition of a stake in its capital in 2014.

General Electric

Still in 2014, the American giant General Electric approached Alstom with a project to create a number of strategic joint ventures.

Thales

Finally, in 2017 there were rumours of a possible partnership under discussion between Thales and Alstom relating to the rail transport activity sector. This is still unconfirmed and details remain sketchy.

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The factors in favour of a rise in the Alstom share price:

The primary advantage of the Alstom group is clearly its position in one of its major activity sectors, that of rail transport with products and services for tramways, underground and TGV. In fact, Alstom is currently one of the leaders in this area on an international level.

Alstom has also benefitted for a while now from the development of emerging countries and their significant ongoing requirements regarding infrastructure. Also, the western countries continue to renew and modernise their own infrastructures. All this combined leads to a worldwide market that the specialists estimate to be worth over 10 billion Euros with a growth of between 2.5 to 3% each year.

Another strong point of the Alstom Group concerns its ability to cover all the aspects of rail construction. This is notably the case since the group acquired the signalisation activities of the General Electric Group which represents over 54% of sales in the signalisation systems and services sector with 17% for signalisation alone. 45% of sales is achieved by the trains and the rest from maintenance services.

The Alstom Group also offers a clear visibility on its future financial returns due to a full order book notably related to international contracts. The short and medium term profitability of this company is therefore not a reason for anxiety at present and investors are thereby largely reassured.

Finally, we also note that the cash return recorded by Alstom over recent years of over 3.2 billion Euros following the sale of its energy activities to the American group General Electric confers Alstom with a certain stability and financial solidity with an almost total elimination of the group’s debt.

The factors in favour of a drop in the Alstom share price:

Firstly, we know that Alstom shares are highly dependent on public expenses and the financing capacities of its major clients. This leads to a significant risk exposure regarding a few different clients that feature on Alstom’s order book. The policy decisions relating to these budgets can therefore be highly influential.

We also know that the Alstom Group has entered, during the last few years, in a sale procedure with the General Electric Group. As can be easily noted, the volatility of the Alstom share price has continued to increase over the same period and in accordance with the announcements made that can be linked to this procedure. This situation should continue through 2020 following a major acceleration in 2018. In fact, in September 2018 Alstom and General Electric were expected to launch their joint venture with Alstom sales options for GE regarding Grid and Renewables that could be introduced onto the stock markets. In 2020 the same situation was predicted to occur with Global Nuclear and French Steam.

Although there is clearly ongoing international development of the Alstom Group activities, growth of these same activities in France remains a major problem that the group needs to resolve which is also reinforced by a governance conflict with the French state which is a minority shareholder in the group.

The investors are also disappointed by the lack of clear objectives relating to the last few years’ operations and a 7% forecast for 2020 against the recent 5.3%.

Of course, we also know that the joint ventures that the Alstom Group has implemented with the General Electric Group are susceptible to significant risks of under-evaluation of the Alstom share price. In fact, the status of the future group is that of an industrial holding until the agreement has been completely finalised.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

What events have marked Alstom's history?

In 1969, Alstom became a subsidiary of Compagnie Générale d'Électricité. The group merged with Chantiers de l'Atlantique and became Alstom Atlantique in 1976. In 1989, Alstom merged with GEC Power Systems and became GEC-Alstom. In 1989, GEC-Alstom becomes Alstom and goes public. In 2010, the group will acquire the transmission activity of Areva T&D. In 2014, the company sells its energy sector to General Electric and the French State acquires 20% of its capital. Finally, in 2020, the group will acquire Bombardier Transport's rail activity.

Where and how can I buy or sell Alstom shares?

To buy or sell Alstom shares, you have several options depending on your investment needs and preferences. You can use the services of online or traditional brokers to place your orders to buy or sell Alstom shares. If you prefer more flexibility in your investments, you can opt for a standard securities account to buy or sell Alstom shares. Finally, CFDs are financial derivatives that allow you to speculate on the price movement of Alstom shares without physically owning them. They can be used for short-term trading, but carry a higher level of risk.

Is Alstom's share price quoted on several indices?

As you probably already know, Alstom is currently one of the companies included in the CAC All Shares index, the benchmark French stock market index. But what you may not know is that it is also part of other indices including the CAC All Tradable, the CAC Large 60, the CAC Next 20, the Euronext 100, the Low Carbon 100 Europe, the SBF 120 and the Stoxx France 50.

Why does the Alstom share price fall?

Alstom's share price can fall for a number of reasons, including if Alstom publishes financial results below analysts' forecasts, this can lead to a drop in investor confidence in the company and cause its share price to fall. Events such as economic recession, political instability, regulatory changes or high interest rates may affect Alstom's share price. If Alstom experiences operational problems such as production delays, technical failures or safety issues, this may lead to a decline in investor confidence in the company and affect its share price. Finally, if investors perceive the industry in which Alstom operates to be less attractive due to a change in market or technology trends, this may adversely affect Alstom's share price in the market.

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Analysis before buying or selling Alstom shares