Energias de Portugal: Still Left Behind

(6min)

Summary

  • EDP remains one of our preferred utilities pick in Europe, currently undervalued despite market concerns over its reinvestment focus and rising net debt.
  • Recent earnings show strong hydro performance, but other renewables lagged. Net debt rose more than 10% year-to-date due to heavy investments in wind and solar.
  • EDP's fixed debt structure and stable business model support leverage, but markets are wary. ND/EBITDA is at 3.6x, a manageable level.
  • To attract more investors and close valuation gaps, EDP needs to demonstrate deleveraging capacity, potentially enabling dividend growth.
  • Looking for a portfolio of ideas like this one? Members of The Value Lab get exclusive access to our subscriber-only portfolios. Learn More »
Ribeira dilhas beach in Ericeira with turquoise water on a sunny day, in Portugal

LuisPinaPhotogrpahy/iStock via Getty Images

Energias de Portugal, or EDP S.A. (OTCPK:EDPFY), remains our preferred utilities pick in Europe, and with the recent pullback in price, it continues to be relatively undervalued as we commented in our last article. We do think some

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This article was written by

The Valkyrie Trading Society is a team of analysts sharing high conviction and obscure developed market ideas that are downside limited and likely to generate non-correlated and outsized returns in the context of the current economic environment and forces. They are long-only investors.

They lead the investing group The Value Lab where they offer members a portfolio with real time updates, chat to answer questions 24/7, regular global market news reports, feedback on member stock ideas, new trades monthly, quarterly earnings write-ups, and daily macro opinions.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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