Neoenergia (BOVESPA:NEOE3) - Share price, News & Analysis

Q: What is the Fair Price of NEOE3 when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

NEOE3 (R$16.75) is trading below our estimate of [[fair value]] (R$72.05)

NEOE3 fundamental analysis
Snowflake Score
Valuation	6/6
Future Growth	1/6
Past Performance	2/6
Financial Health	2/6
Dividends	2/6

NEOE3 Stock Overview

Neoenergia S.A. generates, transmits, distributes, trades in, and commercializes electric energy in Brazil.

Rewards

Trading at 76.8% below our estimate of its fair value

Earnings have grown 38.5% per year over the past 5 years

Risk Analysis

Debt is not well covered by operating cash flow

Dividend of 1.61% is not well covered by earnings

Neoenergia Competitors

Companhia Paranaense de Energia - COPEL

BOVESPA:CPLE6

R$18.8b

Energisa Mato Grosso - Distribuidora de Energia S/A

BOVESPA:ENMT4

R$18.3b

Energisa

BOVESPA:ENGI3

R$19.2b

CTEEP - Companhia de Transmissão de Energia Elétrica Paulista

BOVESPA:TRPL4

R$17.4b

Price History & Performance

Summary of all time highs, changes and price drops for Neoenergia
Historical stock prices
Current Share Price	R$16.75
52 Week High	R$19.34
52 Week Low	R$13.32
Beta	0.74
1 Month Change	18.21%
3 Month Change	-5.26%
1 Year Change	0.60%
3 Year Change	-21.18%
5 Year Change	n/a
Change since IPO	4.69%

Recent News & Updates

Aug 10

Does Neoenergia (BVMF:NEOE3) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says...

May 28

Investors Will Want Neoenergia's (BVMF:NEOE3) Growth In ROCE To Persist

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key...

Shareholder Returns

	NEOE3	BR Electric Utilities	BR Market
7D	4.6%	0.3%	2.8%
1Y	0.6%	10.4%	-18.9%

Return vs Industry: NEOE3 underperformed the BR Electric Utilities industry which returned 9.5% over the past year.

Return vs Market: NEOE3 exceeded the BR Market which returned -18.9% over the past year.

Price Volatility

Is NEOE3's price volatile compared to industry and market?
NEOE3 volatility
NEOE3 Average Weekly Movement	4.1%
Electric Utilities Industry Average Movement	4.1%
Market Average Movement	6.0%
10% most volatile stocks in BR Market	9.4%
10% least volatile stocks in BR Market	2.5%

Stable Share Price: NEOE3 is less volatile than 75% of BR stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: NEOE3's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1997	15,058	Eduardo Capelastegui Saiz	https://www.neoenergia.com

Neoenergia S.A. generates, transmits, distributes, trades in, and commercializes electric energy in Brazil. The company has an installed electricity generation capacity of approximately 4.1 gigawatts; operates 7 hydroelectric plants, 44 wind farms, 826 kilometers of transmission lines, and 8 substations; and distributes electricity to approximately 34 million in the states of Bahia, Pernambuco, Rio Grande do Norte, São Paulo, and Mato Grosso do Sul. It also provides energy management and trading related services.

Neoenergia Fundamentals Summary

How do Neoenergia's earnings and revenue compare to its market cap?
NEOE3 fundamental statistics
Market Cap	R$20.33b
Earnings (TTM)	R$4.20b
Revenue (TTM)	R$45.20b

4.8x

P/E Ratio

0.4x

P/S Ratio

Is NEOE3 overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
NEOE3 income statement (TTM)
Revenue	R$45.20b
Cost of Revenue	R$34.72b
Gross Profit	R$10.49b
Other Expenses	R$6.28b
Earnings	R$4.20b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 25, 2022

Earnings per share (EPS)	3.46
Gross Margin	23.20%
Net Profit Margin	9.30%
Debt/Equity Ratio	167.3%

How did NEOE3 perform over the long term?

See historical performance and comparison

Dividends

1.6%

Current Dividend Yield

8%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is NEOE3 undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

6/6

Valuation Score 6/6

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 NEOE3?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for NEOE3. This is calculated by dividing NEOE3's market cap by their current preferred multiple.
What is NEOE3's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	R$20.33b

NEOE3 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	1.3x
Enterprise Value/EBITDA	4.7x
PEG Ratio	0.7x

Price to Earnings Ratio vs Peers

How does NEOE3's PE Ratio compare to its peers?

NEOE3 PE Ratio vs Peers

The above table shows the PE ratio for NEOE3 vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	10.1x
CPLE6 Companhia Paranaense de Energia - COPEL	8.7x	13.9%	R$18.8b
ENMT4 Energisa Mato Grosso - Distribuidora de Energia S/A	15.5x	n/a	R$18.3b
ENGI3 Energisa	10.8x	10.3%	R$19.2b
TRPL4 CTEEP - Companhia de Transmissão de Energia Elétrica Paulista	5.6x	12.4%	R$17.4b
NEOE3 Neoenergia	4.8x	7.3%	R$20.3b

Price-To-Earnings vs Peers: NEOE3 is good value based on its Price-To-Earnings Ratio (4.8x) compared to the peer average (10.1x).

Price to Earnings Ratio vs Industry

How does NEOE3's PE Ratio compare vs other companies in the BR Electric Utilities Industry?

Price-To-Earnings vs Industry: NEOE3 is good value based on its Price-To-Earnings Ratio (4.8x) compared to the BR Electric Utilities industry average (7.3x)

Price to Earnings Ratio vs Fair Ratio

What is NEOE3'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.

NEOE3 PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	4.8x
Fair PE Ratio	7.5x

Price-To-Earnings vs Fair Ratio: NEOE3 is good value based on its Price-To-Earnings Ratio (4.8x) compared to the estimated Fair Price-To-Earnings Ratio (7.5x).

Share Price vs Fair Value

What is the Fair Price of NEOE3 when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: NEOE3 (R$16.75) is trading below our estimate of fair value (R$72.05)

Significantly Below Fair Value: NEOE3 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 more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.

Discover undervalued companies

Future Growth

How is Neoenergia forecast to perform in the next 1 to 3 years based on estimates from 10 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

7.3%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: NEOE3's forecast earnings growth (7.3% per year) is below the savings rate (9.2%).

Earnings vs Market: NEOE3's earnings (7.3% per year) are forecast to grow faster than the BR market (6.2% per year).

High Growth Earnings: NEOE3's earnings are forecast to grow, but not significantly.

Revenue vs Market: NEOE3's revenue (3.1% per year) is forecast to grow slower than the BR market (5.2% per year).

High Growth Revenue: NEOE3's revenue (3.1% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: NEOE3's Return on Equity is forecast to be low in 3 years time (12.7%).

Discover growth companies

Past Performance

How has Neoenergia performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

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

38.5%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: NEOE3 has high quality earnings.

Growing Profit Margin: NEOE3's current net profit margins (9.3%) are lower than last year (10.2%).

Past Earnings Growth Analysis

Earnings Trend: NEOE3's earnings have grown significantly by 38.5% per year over the past 5 years.

Accelerating Growth: NEOE3's earnings growth over the past year (10.1%) is below its 5-year average (38.5% per year).

Earnings vs Industry: NEOE3 earnings growth over the past year (10.1%) underperformed the Electric Utilities industry 13.5%.

Return on Equity

High ROE: NEOE3's Return on Equity (16.7%) is considered low.

Discover strong past performing companies

Financial Health

How is Neoenergia's financial position?

Financial Health Score

2/6

Financial Health Score 2/6

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

Financial Position Analysis

Short Term Liabilities: NEOE3's short term assets (R$22.2B) exceed its short term liabilities (R$17.9B).

Long Term Liabilities: NEOE3's short term assets (R$22.2B) do not cover its long term liabilities (R$46.6B).

Debt to Equity History and Analysis

Debt Level: NEOE3's net debt to equity ratio (140.8%) is considered high.

Reducing Debt: NEOE3's debt to equity ratio has increased from 146.5% to 167.3% over the past 5 years.

Debt Coverage: NEOE3's debt is not well covered by operating cash flow (4.9%).

Interest Coverage: NEOE3's interest payments on its debt are well covered by EBIT (4.1x coverage).

Balance Sheet

Discover healthy companies

Dividend

What is Neoenergia current dividend yield, its reliability and sustainability?

Dividend Score

2/6

Dividend Score 2/6

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

1.61%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: NEOE3's dividend (1.61%) is higher than the bottom 25% of dividend payers in the BR market (1.57%).

High Dividend: NEOE3's dividend (1.61%) is low compared to the top 25% of dividend payers in the BR market (7.46%).

Stability and Growth of Payments

Stable Dividend: NEOE3 has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: NEOE3 has only been paying a dividend for 3 years, and since then payments have fallen.

Earnings Payout to Shareholders

Earnings Coverage: With its low payout ratio (7.8%), NEOE3's dividend payments are thoroughly covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: NEOE3 is paying a dividend but the company has no free cash flows.

Discover strong dividend paying companies

Management

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

1.8yrs

Average management tenure

CEO

Eduardo Capelastegui Saiz (52 yo)

0.083

Tenure

Mr. Eduardo Capelastegui Saiz serves as Member of Executive Board and Executive Director of Patrimonial Control and Planning? at Neoenergia S.A and serves as its Director since June 2022. He is Chief Execu...

Leadership Team

Experienced Management: NEOE3's management team is not considered experienced ( 1.8 years average tenure), which suggests a new team.

Board Members

Experienced Board: NEOE3's board of directors are not considered experienced ( 1.6 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

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

Data	Last Updated (UTC time)
Company Analysis	2022/08/12 00:00
End of Day Share Price	2022/08/12 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31