SONAE: Fundamental figures too good to overlook. Time to buy?Fundamental Analysis
EBITDA: +7.2% YoY (to €990M in 2023)
Margin: 11.8% (-0.2 points YoY)
Net Income Group Share = 357 (+6.3% YoY)
PER: 1680 / 357 = 4.71 (heavily undervalued considering below data and historical PERs)
Net Gearing (Net Debt To Equity Ratio, ): 526/3462 = 0.15 (15%, Prudent)
Total Debt To Equity Ratio: 5383 / 3462 = 1.55 (around 1 to 1.5 is healthy according to British Business Bank's article "Debt to equity ratios for healthy businesses")
Current ratio: 2010/2502= 0.80 (not healthy and almost unchanged with respect to 2022, see next line. According to Wall Street Prep, 1.5 to 3.0 is healthy)
Net Debt to Ebitda = 526 / 990 = 0.53
Working Capital = -1220M€, keeps being negative. Very interesting article from eFinanceManagement explains the Advantages of Negative Working Capital for a cash-rich company whose operating cycle is fast (it may mean that they can bargain very well with their suppliers who provide the funds and the flexible time limit to pay).
Prev Current ratio (2022): 1938/2465 = 0.79
Proposed dividend for 2023: 0.05639€
EPS = 357M€ / 2000M = 0.18€/share (ATH?)
Current dividend yield = 6.19%
Dividend Payout Ratio = x 100 = 31%
Free cash flow Dividend payout ratio = x 100 = 60%
Technical Analysis
There was a disjoint channel happening since July 2022 on the Daily Graph in which the share price dropped out in the lower end in December 2023. Since the company has very good fundamentals, the possibility of an inverse H&S could be around the corner, having an interesting point of entry at 0.78-0.81. However, the share price is already heavily undervalued considering the fundamental analysis previously done. The daily RSI (14) bounced back in March 2023 from below 30 directly to the upper band at 70 indicating the possibility of a continuation of share price upward movement up to +20%. Therefore, it is up to the investor to decide whether at current prices (0.85-0.88€) is already worth the risk (if the 0.78€ ever gets touched and then bounces back up, the drawdown risk would be -11.4%).
Finally, it is expected that on May the company will pay the dividend. Therefore, the share price may re-adjust its value upwards in April before the dividend is paid and the share price is subsequently slashed down again.
Have a great week ahead.
