Meridian Energy (NZSE:MEL) - Share price, News & Analysis

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

MEL (NZ$5.25) is trading above our estimate of [[fair value]] (NZ$2.57)

MEL fundamental analysis
Snowflake Score
Valuation	0/6
Future Growth	0/6
Past Performance	5/6
Financial Health	4/6
Dividends	1/6

MEL Stock Overview

Meridian Energy Limited engages in the generation, trading, and retailing of electricity to residential, business, and industrial customers in New Zealand, Australia, and the United Kingdom.

Rewards

Earnings grew by 64% over the past year

Risk Analysis

Earnings are forecast to decline by an average of 8.2% per year for the next 3 years

Dividend of 3.25% is not well covered by earnings or forecast to be in the next 3 years

Meridian Energy Competitors

Mercury NZ

NZSE:MCY

NZ$9.0b

Contact Energy

NZSE:CEN

NZ$6.0b

NZ Windfarms

NZSE:NWF

NZ$54.4m

Vector

NZSE:VCT

NZ$4.6b

Price History & Performance

Summary of all time highs, changes and price drops for Meridian Energy
Historical stock prices
Current Share Price	NZ$5.25
52 Week High	NZ$5.36
52 Week Low	NZ$4.32
Beta	0.73
1 Month Change	7.58%
3 Month Change	13.88%
1 Year Change	0.19%
3 Year Change	8.47%
5 Year Change	75.00%
Change since IPO	109.16%

Recent News & Updates

Jun 06

Meridian Energy (NZSE:MEL) Has Some Way To Go To Become A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term...

May 10

Here's Why I Think Meridian Energy (NZSE:MEL) Might Deserve Your Attention Today

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story...

Shareholder Returns

	MEL	NZ Renewable Energy	NZ Market
7D	0.7%	0.5%	0.3%
1Y	0.2%	-1.1%	-11.1%

Return vs Industry: MEL exceeded the NZ Renewable Energy industry which returned -1.1% over the past year.

Return vs Market: MEL exceeded the NZ Market which returned -11.1% over the past year.

Price Volatility

Is MEL's price volatile compared to industry and market?
MEL volatility
MEL Average Weekly Movement	4.2%
Renewable Energy Industry Average Movement	14.8%
Market Average Movement	4.3%
10% most volatile stocks in NZ Market	8.3%
10% least volatile stocks in NZ Market	3.0%

Stable Share Price: MEL is not significantly more volatile than the rest of NZ stocks over the past 3 months, typically moving +/- 4% a week.

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

About the Company

Founded	Employees	CEO	Website
1998	1,015	Neal Barclay	https://www.meridianenergy.co.nz

Meridian Energy Limited engages in the generation, trading, and retailing of electricity to residential, business, and industrial customers in New Zealand, Australia, and the United Kingdom. It generates electricity through wind farms, hydro power stations, and solar farms. The company also provides management, insurance, financing, professional, trustee, and software development services; and licenses Flux developed electricity and gas retailing platform, as well as offers solar installation services.

Meridian Energy Fundamentals Summary

How do Meridian Energy's earnings and revenue compare to its market cap?
MEL fundamental statistics
Market Cap	NZ$13.51b
Earnings (TTM)	NZ$346.00m
Revenue (TTM)	NZ$4.28b

39.1x

P/E Ratio

3.2x

P/S Ratio

Is MEL overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
MEL income statement (TTM)
Revenue	NZ$4.28b
Cost of Revenue	NZ$3.55b
Gross Profit	NZ$728.00m
Other Expenses	NZ$382.00m
Earnings	NZ$346.00m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

Aug 23, 2022

Earnings per share (EPS)	0.13
Gross Margin	17.02%
Net Profit Margin	8.09%
Debt/Equity Ratio	35.0%

How did MEL perform over the long term?

See historical performance and comparison

Dividends

3.2%

Current Dividend Yield

126%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

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

Valuation Score

0/6

Valuation Score 0/6

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 MEL?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for MEL. This is calculated by dividing MEL's market cap by their current preferred multiple.
What is MEL's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	NZ$13.51b

MEL 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	3.6x
Enterprise Value/EBITDA	21x
PEG Ratio	-4.8x

Price to Earnings Ratio vs Peers

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

MEL PE Ratio vs Peers

The above table shows the PE ratio for MEL vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	20.1x
MCY Mercury NZ	20.9x	-8.1%	NZ$9.0b
CEN Contact Energy	24.6x	1.8%	NZ$6.0b
NWF NZ Windfarms	12.8x	n/a	NZ$54.4m
VCT Vector	22.7x	-2.9%	NZ$4.6b
MEL Meridian Energy	39.1x	-8.2%	NZ$13.5b

Price-To-Earnings vs Peers: MEL is expensive based on its Price-To-Earnings Ratio (39.1x) compared to the peer average (20.1x).

Price to Earnings Ratio vs Industry

How does MEL's PE Ratio compare vs other companies in the Global Renewable Energy Industry?

Price-To-Earnings vs Industry: MEL is expensive based on its Price-To-Earnings Ratio (39.1x) compared to the Global Renewable Energy industry average (17.6x)

Price to Earnings Ratio vs Fair Ratio

What is MEL'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.

MEL PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	39.1x
Fair PE Ratio	32.2x

Price-To-Earnings vs Fair Ratio: MEL is expensive based on its Price-To-Earnings Ratio (39.1x) compared to the estimated Fair Price-To-Earnings Ratio (32.2x).

Share Price vs Fair Value

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

Below Fair Value: MEL (NZ$5.25) is trading above our estimate of fair value (NZ$2.57)

Significantly Below Fair Value: MEL is trading above our estimate of fair value.

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 Meridian Energy forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

Future Growth Score

0/6

Future Growth Score 0/6

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

-8.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: MEL's earnings are forecast to decline over the next 3 years (-8.2% per year).

Earnings vs Market: MEL's earnings are forecast to decline over the next 3 years (-8.2% per year).

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

Revenue vs Market: MEL's revenue is expected to decline over the next 3 years (-2.7% per year).

High Growth Revenue: MEL's revenue is forecast to decline over the next 3 years (-2.7% per year).

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: MEL's Return on Equity is forecast to be low in 3 years time (5.9%).

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Past Performance

How has Meridian Energy performed over the past 5 years?

Past Performance Score

5/6

Past Performance Score 5/6

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

12.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: MEL has high quality earnings.

Growing Profit Margin: MEL's current net profit margins (8.1%) are higher than last year (6.4%).

Past Earnings Growth Analysis

Earnings Trend: MEL's earnings have grown by 12.4% per year over the past 5 years.

Accelerating Growth: MEL's earnings growth over the past year (64%) exceeds its 5-year average (12.4% per year).

Earnings vs Industry: MEL earnings growth over the past year (64%) exceeded the Renewable Energy industry 8.5%.

Return on Equity

High ROE: MEL's Return on Equity (6.7%) is considered low.

Discover strong past performing companies

Financial Health

How is Meridian Energy's financial position?

Financial Health Score

4/6

Financial Health Score 4/6

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

Financial Position Analysis

Short Term Liabilities: MEL's short term assets (NZ$1.4B) exceed its short term liabilities (NZ$901.0M).

Long Term Liabilities: MEL's short term assets (NZ$1.4B) do not cover its long term liabilities (NZ$3.6B).

Debt to Equity History and Analysis

Debt Level: MEL's net debt to equity ratio (32.1%) is considered satisfactory.

Reducing Debt: MEL's debt to equity ratio has increased from 25.1% to 35% over the past 5 years.

Debt Coverage: MEL's debt is well covered by operating cash flow (26.1%).

Interest Coverage: MEL earns more interest than it pays, so coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is Meridian Energy current dividend yield, its reliability and sustainability?

Dividend Score

1/6

Dividend Score 1/6

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

3.25%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: MEL's dividend (3.25%) is higher than the bottom 25% of dividend payers in the NZ market (2.95%).

High Dividend: MEL's dividend (3.25%) is low compared to the top 25% of dividend payers in the NZ market (5.91%).

Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, MEL has been paying a dividend for less than 10 years.

Growing Dividend: MEL's dividend payments have increased, but the company has only paid a dividend for 7 years.

Earnings Payout to Shareholders

Earnings Coverage: With its high payout ratio (126.5%), MEL's dividend payments are not well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (145.5%), MEL's dividend payments are not well covered by cash flows.

Discover strong dividend paying companies

Management

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

3.0yrs

Average management tenure

CEO

Neal Barclay

4.58yrs

Tenure

NZ$2,308,446

Compensation

Mr. Neal Barclay has been Chief Executive Officer of Meridian Energy Limited since January 1, 2018. Mr. Barclay served as General Manager of Retail at Meridian Energy Limited since April 5, 2016 until July...

CEO Compensation Analysis

Compensation vs Market: Neal's total compensation ($USD1.45M) is about average for companies of similar size in the NZ market ($USD2.01M).

Compensation vs Earnings: Neal's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: MEL's management team is considered experienced (3 years average tenure).

Board Members

Experienced Board: MEL's board of directors are not considered experienced ( 2.9 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: MEL insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

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

Data	Last Updated (UTC time)
Company Analysis	2022/08/10 00:00
End of Day Share Price	2022/08/10 00:00
Earnings	2021/12/31
Annual Earnings	2021/06/30