Enel shares: Price analysis before buying or selling

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ISIN code: IT0003128367

Ticker: BIT: ENEL

Index or market: FTSE MIB

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Elements to consider before selling or buying Enel shares

Analysis N°1

We would notably follow operations aimed at increasing the development of Enel’s activities abroad, notably on the emerging markets including India, Africa and the Middle East.

Analysis N°2

The electricity market in Italy as well as Europe and its strong growth can provide supplementary revenue to this company.

Analysis N°3

In the same way, the support of the Italian and European governments for the development of green energy is also a significant factor to monitor as this could directly encourage this company’s growth and development.

Analysis N°4

The commodities market and particularly that of the natural gas sector should also be taken into consideration before trading in the Enel share price as this commodity’s price has an impact on this group’s income.

Analysis N°5

The governmental policies of other countries where Enel exercises its activities can also vary in their level of restrictions and should therefore be studied.

Analysis N°6

Finally, the financial health of Europe is also an indicator of the wellbeing of Enel’s activities.

Analysis before buying or selling Enel shares

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General presentation of Enel

In order to carry out your analysis of Enel's share price on the stock market, it is essential to know this company, its activities and its main sources of revenue. This will allow you to understand how the company can effectively face its future challenges in the years to come. Here is a complete presentation of the company and its sector:

The Enel SpA Group is an Italian company that specialises in the energy sector. More specifically, the company is currently the leader in the production and distribution of electricity in Italy.

In order to better understand the activities carried out by Enel, they can be divided into different poles according to the share of turnover they generate and in this way:

First of all, the electricity and natural gas sales activities represent the major part of the company's revenues with 59.8% of the turnover. Thus, each year, the group produces more than 200 Twh of electricity and sells more than 290 Twh and more than 9 billion cubic metres of natural gas. Alongside these activities, the Enel Group is also developing an engineering and construction activity for plants and electricity production units.
The electricity transmission and distribution activities are the second largest source of revenue for the Enel Group, accounting for 17.1% of the company's turnover. Each year, the group transports more than 400 Twh of electricity. It should also be noted that the Enel Group currently has and operates an electricity transmission network covering more than 2,231,961 km.
Finally, the remainder of the Enel Group's turnover, i.e. 23.1%, comes from the sale of related products and services.

Enel currently employs 66,717 people, mainly in Italy.

Photo credits: ©unitysphere/123RF.COM

The major competitors of Enel

We now propose to tell you more about the main competitors of the Enel group with a presentation of the players in this sector who currently have the largest market share.

EDF

The EDF Group or Electricité de France is a French group specialising in the production and supply of electricity and is partly owned by the State. It is also the historical producer and supplier of electricity in France, as well as the largest in Europe and the second largest in the world in terms of installed capacity.

Engie

Another French group, Engie, also specialises in non-oil energy production and is the world's third largest in this sector. It is also partly owned by the French state, which still holds 23.64% of the capital. The group was created in 2008 by the merger of Gaz de France and Suez and became the largest public service company in 2010 in terms of turnover.

E.ON

The European group E.ON is also specialised in the energy sector and was formerly a share company under German law. It was formed from the merger of the German groups Veba and Viag in 2000 and the group is listed on the Frankfurt Stock Exchange and is part of the DAX 30.

RWE

Another serious competitor to Enel is the German conglomerate RWE AG, which specialises in the energy sector and was founded in 1898. It specialises in electricity, water and gas distribution as well as environmental services and operates mainly in Europe and North America. It is currently the second largest electricity producer in Germany.

Iberdrola

The last direct competitor of this group is undoubtedly the Spanish group Iberdrola, which also specialises in the production and sale of electricity and natural gas. The group is one of the 10 largest electricity producers in the world and is the world leader in the wind energy production sector. The group operates in dozens of countries around the world and has more than 30 million customers and over 30,000 employees. It is listed on the Madrid Stock Exchange and is part of the Ibex 35 index.

The major partners of Enel

EDF

In 2007, during a Franco-Italian summit at Nice, the Italian leader in electricity, Enel, signed a partnership agreement authorising the Italian group to participate in a third generation EPR French nuclear programme.

Mitsubishi

In 2010, Enel and Mitsubishi held a joint work group to define, among other things, some proposals for gradual investment opportunities and their implementation in certain countries relating to the two parties concerned and these were submitted to the Committee Director.

Renault

In 2017 Renault announced the signature of an exclusive partnership agreement with Sicily by Car, an Italian car rental company, and Enel, the major supplier of energy in the country, for the completion of a project entitled ‘Eco Tour di Sicilia'.

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

Firstly it should be remembered that the Enel Group is one of the largest names in its activity sector notably due to its diverse and wide ranging portfolio of products and services related to the energy sector. In fact the company currently produces electricity through various sources including gas, hydroelectricity, coal, nuclear, geothermal and wind farms. Also it has implemented a vertical integration of its operations thereby enabling it to operate the entire supply chain and benefit from a greater freedom in terms of strategy.

We can also note as a major strong point the significant internationalisation of this group’s activities. In fact, from a geographical point of view, the Enel Group benefits from a major presence worldwide with activities in over 40 countries spread over 4 continents. This has of course enabled the group to generate a comfortable income even with the Italian crisis as well as being protected against the risk associated with being present in a single unique market. In total Enel currently employs over 75,000 people in these different countries and benefits from a dominant position on the market with a noteworthy clientele.

To guarantee its income the Enel Group can particularly count upon its particularly high production capabilities. In fact, the company is capable of producing amounts of over 100GW of electricity and benefits at the same time from a significant cash flow which enables it to adapt this production to the real time requirements of the market and on demand.

Still relating to the positive points from which the Enel Group benefits, we can also point out the current aspirations of the company to increase its development in coal free energy. In fact, at present, nearly half the energy produced by Enel is free of carbon emissions. Regarding the current ecological challenges, Enel therefore seems to be positively positioning itself relative to future energy sources and should therefore reap the benefits from these efforts in the future.

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

Firstly we note that the Enel Group, although it benefits from a worldwide presence, is concentrated to a major extent on its European activities. We are particularly disappointed by its low position in certain markets generally considered as highly lucrative such as Asia or Africa. The company should therefore increase its efforts to expand its activities around the world and obtain a more balanced geographical presence worldwide across all the continents to protect itself against a geo-economic risk.

The worldwide competition is also another sensitive point for the Enel Company. In fact, although this Italian group has succeeded in becoming one of the leaders in this activity sector, its major competitors fiercely contest the market and consistently try to recover Enel’s market share. This company must therefore do everything possible to remain competitive in terms of the price of its energy and invest in new and innovative services as well as intelligent marketing to keep its position, notably in the European market which includes some major brands in the energy sector.

On the other hand, we know that the Enel Group has recently been implicated in certain far reaching judicial procedures. Due to the high media exposure from these procedures the brand image has been severely tarnished and Enel needs to redouble its efforts to win back the support and popularity it enjoyed with its client sector. Also, these different procedures have had certain consequences relating to the company’s treasury which has of course been depleted due to the costs involved. It is clear that any future processes will also have a severe negative effect on the company’s profitability and share price.

Although it may appear that the Enel Company has only three major disadvantages it is important to understand that these could have a significant impact if they are not resolved. They should therefore be taken into account when completing your analyses and when implementing your strategies.

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

Are Enel shares included in the composition of any stock market indices?

The Enel share price which is quoted directly in real time on the MTA market of the Bolsa Italiana, is also integrated into several major stock market indices. Its principal index is of course the Euro Stoxx 50. However we can also find Enel shares available through other stock market indices including the FTSE Eurotop 100, the FTSE MIB which is the major Italian reference index, the Stoxx Europe 50, the Stoxx Global 200 and the Stoxx Italy 20.

How has the Enel share price performed over recent years?

It can be advantageous to understand the performance of the Enel share price over recent years on the stock markets. We know that this share price climbed by 11.03% over the last year. Over two years it achieved an increase of 28.13%. It rose by 45.79% over three years and the overall increase of this asset over the last five years was 44.11%.

Who are the major shareholders of the Enel group at present?

Knowing the major shareholders of the Enel Group is an essential point before taking position on this asset. In fact, at the present time in April 2020, the major shareholders of the group are as follows: 23.59% of the shares are held by the Italian Ministry of Finance and Economy and the BlackRock Investment Fund also holds 4.83% of this company’s share capital.

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Analysis before buying or selling Enel shares