CPFL Energia (BOVESPA:CPFE3) - Share price, News & Analysis

Q: What is the Fair Price of CPFE3 when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

CPFE3 (R$34.25) is trading below our estimate of [[fair value]] (R$46.88)

CPFE3 fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	1/6
Past Performance	3/6
Financial Health	3/6
Dividends	4/6

CPFE3 Stock Overview

CPFL Energia S.A., through its subsidiaries, generates, transmits, distributes, and commercializes electricity to residential, industrial, and commercial customers in Brazil.

Rewards

Trading at 26.9% below our estimate of its fair value

Earnings grew by 15.9% over the past year

Trading at good value vs. industry average Price-To-Earnings ratio

Risk Analysis

Earnings are forecast to decline by an average of 4.2% per year for the next 3 years

Has a high level of debt

Dividend of 11.5% is not well covered

CPFL Energia Competitors

Companhia Energética de Minas Gerais

BOVESPA:CMIG4

R$28.5b

Equatorial Energia

BOVESPA:EQTL3

R$31.5b

Energisa

BOVESPA:ENGI3

R$18.0b

Neoenergia

BOVESPA:NEOE3

R$18.6b

Price History & Performance

Summary of all time highs, changes and price drops for CPFL Energia
Historical stock prices
Current Share Price	R$34.25
52 Week High	R$37.06
52 Week Low	R$24.21
Beta	0.53
1 Month Change	-5.47%
3 Month Change	8.97%
1 Year Change	35.16%
3 Year Change	4.74%
5 Year Change	25.14%
Change since IPO	322.51%

Recent News & Updates

Sep 26

Here's Why CPFL Energia (BVMF:CPFE3) Can Manage Its Debt Responsibly

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of...

Jul 18

Returns On Capital Are Showing Encouraging Signs At CPFL Energia (BVMF:CPFE3)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for...

Jun 27

These 4 Measures Indicate That CPFL Energia (BVMF:CPFE3) Is Using Debt Reasonably Well

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of...

Shareholder Returns

	CPFE3	BR Electric Utilities	BR Market
7D	0.7%	3.1%	6.5%
1Y	35.2%	10.7%	-7.2%

Return vs Industry: CPFE3 exceeded the BR Electric Utilities industry which returned 10.4% over the past year.

Return vs Market: CPFE3 exceeded the BR Market which returned -7.9% over the past year.

Price Volatility

Is CPFE3's price volatile compared to industry and market?
CPFE3 volatility
CPFE3 Average Weekly Movement	4.0%
Electric Utilities Industry Average Movement	4.2%
Market Average Movement	5.7%
10% most volatile stocks in BR Market	9.5%
10% least volatile stocks in BR Market	2.8%

Stable Share Price: CPFE3 is less volatile than 75% of BR stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: CPFE3's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1998	16,040	Gustavo Estrella	https://www.cpfl.com.br

CPFL Energia S.A., through its subsidiaries, generates, transmits, distributes, and commercializes electricity to residential, industrial, and commercial customers in Brazil. The company generates electricity through wind, biomass, solar, and hydroelectric power plants. As of December 31, 2021, the company distributed electricity to approximately 10.2 million customers; had 336,053 kilometers of distribution lines, which included 498,155 distribution transformers; and 565 transformer substations, from high to medium voltage, with total transformer capacity of 19,178 MVA.

CPFL Energia Fundamentals Summary

How do CPFL Energia's earnings and revenue compare to its market cap?
CPFE3 fundamental statistics
Market Cap	R$39.46b
Earnings (TTM)	R$5.05b
Revenue (TTM)	R$40.72b

7.8x

P/E Ratio

1.0x

P/S Ratio

Is CPFE3 overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
CPFE3 income statement (TTM)
Revenue	R$40.72b
Cost of Revenue	R$30.74b
Gross Profit	R$9.98b
Other Expenses	R$4.93b
Earnings	R$5.05b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	4.38
Gross Margin	24.50%
Net Profit Margin	12.40%
Debt/Equity Ratio	191.1%

How did CPFE3 perform over the long term?

See historical performance and comparison

Dividends

11.5%

Current Dividend Yield

90%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is CPFE3 undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for CPFE3?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for CPFE3. This is calculated by dividing CPFE3's market cap by their current preferred multiple.
What is CPFE3's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	R$39.46b

CPFE3 key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.5x
Enterprise Value/EBITDA	6.2x
PEG Ratio	-1.9x

Price to Earnings Ratio vs Peers

How does CPFE3's PE Ratio compare to its peers?

CPFE3 PE Ratio vs Peers

The above table shows the PE ratio for CPFE3 vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	7.8x
CMIG4 Companhia Energética de Minas Gerais	8.4x	14.0%	R$28.5b
EQTL3 Equatorial Energia	9.7x	15.3%	R$31.5b
ENGI3 Energisa	8.8x	-7.8%	R$18.0b
NEOE3 Neoenergia	4.4x	6.5%	R$18.6b
CPFE3 CPFL Energia	7.8x	-4.2%	R$39.5b

Price-To-Earnings vs Peers: CPFE3 is good value based on its Price-To-Earnings Ratio (7.8x) compared to the peer average (7.8x).

Price to Earnings Ratio vs Industry

How does CPFE3's PE Ratio compare vs other companies in the BR Electric Utilities Industry?

Price-To-Earnings vs Industry: CPFE3 is expensive based on its Price-To-Earnings Ratio (7.8x) compared to the BR Electric Utilities industry average (7.6x)

Price to Earnings Ratio vs Fair Ratio

What is CPFE3's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

CPFE3 PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	7.8x
Fair PE Ratio	6.7x

Price-To-Earnings vs Fair Ratio: CPFE3 is expensive based on its Price-To-Earnings Ratio (7.8x) compared to the estimated Fair Price-To-Earnings Ratio (6.7x).

Share Price vs Fair Value

What is the Fair Price of CPFE3 when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: CPFE3 (R$34.25) is trading below our estimate of fair value (R$46.88)

Significantly Below Fair Value: CPFE3 is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is CPFL Energia forecast to perform in the next 1 to 3 years based on estimates from 11 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

-4.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: CPFE3's earnings are forecast to decline over the next 3 years (-4.2% per year).

Earnings vs Market: CPFE3's earnings are forecast to decline over the next 3 years (-4.2% per year).

High Growth Earnings: CPFE3's earnings are forecast to decline over the next 3 years.

Revenue vs Market: CPFE3's revenue (2.3% per year) is forecast to grow slower than the BR market (6.3% per year).

High Growth Revenue: CPFE3's revenue (2.3% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: CPFE3's Return on Equity is forecast to be high in 3 years time (31.1%)

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Past Performance

How has CPFL Energia performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

30.3%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: CPFE3 has high quality earnings.

Growing Profit Margin: CPFE3's current net profit margins (12.4%) are lower than last year (12.8%).

Past Earnings Growth Analysis

Earnings Trend: CPFE3's earnings have grown significantly by 30.3% per year over the past 5 years.

Accelerating Growth: CPFE3's earnings growth over the past year (15.9%) is below its 5-year average (30.3% per year).

Earnings vs Industry: CPFE3 earnings growth over the past year (15.9%) exceeded the Electric Utilities industry 3.5%.

Return on Equity

High ROE: Whilst CPFE3's Return on Equity (36.29%) is high, this metric is skewed due to their high level of debt.

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Financial Health

How is CPFL Energia's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: CPFE3's short term assets (R$14.6B) do not cover its short term liabilities (R$15.5B).

Long Term Liabilities: CPFE3's short term assets (R$14.6B) do not cover its long term liabilities (R$36.1B).

Debt to Equity History and Analysis

Debt Level: CPFE3's net debt to equity ratio (162.4%) is considered high.

Reducing Debt: CPFE3's debt to equity ratio has reduced from 195.2% to 191.1% over the past 5 years.

Debt Coverage: CPFE3's debt is well covered by operating cash flow (23.5%).

Interest Coverage: CPFE3's interest payments on its debt are well covered by EBIT (14.6x coverage).

Balance Sheet

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Dividend

What is CPFL Energia current dividend yield, its reliability and sustainability?

Dividend Score

4/6

Dividend Score 4/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

11.50%

Current Dividend Yield

Dividend Yield vs Market

CPFL Energia Dividend Yield vs Market

How does CPFL Energia dividend yield compare to the market?
Segment	Dividend Yield
Company (CPFL Energia)	11.5%
Market Bottom 25% (BR)	1.5%
Market Top 25% (BR)	6.8%
Industry Average (Electric Utilities)	6.7%
Analyst forecast in 3 Years (CPFL Energia)	10.3%

Notable Dividend: CPFE3's dividend (11.5%) is higher than the bottom 25% of dividend payers in the BR market (1.51%).

High Dividend: CPFE3's dividend (11.5%) is in the top 25% of dividend payers in the BR market (6.79%)

Stability and Growth of Payments

Stable Dividend: CPFE3's dividend payments have been volatile in the past 10 years.

Growing Dividend: CPFE3's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: At its current payout ratio (89.9%), CPFE3's payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (203.5%), CPFE3's dividend payments are not well covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

3.7yrs

Average management tenure

CEO

Gustavo Estrella (48 yo)

3.75yrs

Tenure

Mr. Gustavo Estrella Mr. Estrella has been Chief Executive Officer and Director of CPFL Energia S.A. and CPFL Geração de Energia S.A. since January 31, 2019 and was its Interim Senior Executive Vice-Presi...

Leadership Team

Experienced Management: CPFE3's management team is considered experienced (3.7 years average tenure).

Board Members

Experienced Board: CPFE3's board of directors are not considered experienced ( 2.8 years average tenure), which suggests a new board.

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

What is the ownership structure of CPFE3?
Owner Type	Number of Shares	Ownership Percentage
General Public	93,111,554	8.1%
Institutions	94,620,984	8.2%
Private Companies	964,521,902	83.7%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Top Shareholders

Top 25 shareholders own 90.17% of the company

Ownership	Name	Shares	Current Value	Change %	Portfolio %
83.71%	State Grid Corporation of China	964,521,902	R$33.0b	0%	no data
1.36%	BlackRock, Inc.	15,691,666	R$537.4m	-0.92%	no data
0.75%	SEI Investments Company	8,698,855	R$297.9m	3.31%	0.1%
0.67%	The Vanguard Group, Inc.	7,746,218	R$265.3m	1.16%	no data
0.46%	ClearBridge Investments Limited	5,322,213	R$182.3m	2.27%	0.8%
0.44%	Boston Partners Global Investors, Inc.	5,108,700	R$175.0m	-7.95%	0.03%
0.29%	Allspring Global Investments, LLC	3,299,346	R$113.0m	0.16%	0.04%
0.24%	AP Fonden 2	2,766,900	R$94.8m	0%	0.14%
0.18%	Icatu Vanguarda Administração de Recursos Ltda.	2,060,405	R$70.6m	0%	5.21%
0.17%	Victory Capital Management Inc.	1,918,400	R$65.7m	-0.97%	0.01%
0.17%	Tempo Capital Gestão De Recursos	1,908,131	R$65.4m	0%	4.92%
0.16%	Mirae Asset Global Investments Co., Ltd	1,896,177	R$64.9m	14.54%	0.02%
0.16%	Goldman Sachs Asset Management, L.P.	1,881,639	R$64.4m	-5.19%	0.01%
0.16%	Franklin Resources, Inc.	1,812,217	R$62.1m	-0.36%	0.01%
0.15%	Ibirapuera Performance Investimentos Ltda.	1,775,417	R$60.8m	0%	5.52%
0.14%	Claritas Administração de Recursos LTDA.	1,623,200	R$55.6m	0%	8.12%
0.14%	CIBC Asset Management Inc.	1,598,669	R$54.8m	0.22%	0.03%
0.13%	Real Grandeza Fundação de Previdencia e Assistencia Social	1,549,771	R$53.1m	0%	3.28%
0.13%	Itau Unibanco S.A., Asset Management Arm	1,488,469	R$51.0m	-6.6%	0.15%
0.11%	Bradesco Asset Management S.A. Distribuidora de Títulos e Valores Mobiliários	1,272,800	R$43.6m	0%	0.31%
0.1%	BNY Mellon Asset Management	1,173,876	R$40.2m	-1.72%	no data
0.087%	Principal Gestão De Investimentos Ltda.	1,000,000	R$34.3m	0%	2.96%
0.086%	Kapitalo Investimentos Ltda.	988,735	R$33.9m	0%	0.59%
0.082%	Forpus Capital Gestao de Recursos LTDA	940,000	R$32.2m	0%	3.86%
0.081%	Fundação dos Economiários Federais	929,015	R$31.8m	0%	0.31%

Data	Last Updated (UTC time)
Company Analysis	2022/10/05 00:00
End of Day Share Price	2022/10/05 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31