suez sa stock analysis

Suez Stock Analysis – Free ECB Money Allows Them To Dream

Suez stock analysis is part of a full Waste Management stocks sector investing analysis alongside a list of 15 waste management stocks, all analyzed.

Suez Stock Analysis

Suez SA is a French-based utility company which operates largely in the water treatment and waste management sectors.

Suez stock didn’t do any miracles over the past decade but the dividend is significant at 4.79%.

Suez stock price
Suez stock price

The management recently published Suez SA plan for 2030. If I scroll through it, I see many empty words. The stock didn’t go anywhere for a reason. The reason is that fancy, but empty words don’t make for a competitive advantage.

Suez stock - change plans – Source: Suez SA 2030 Strategy
Suez stock – change plans – Source: Suez SA 2030 Strategy

The last decade has been a decade of renegotiating water contracts in France, the same is about to happen in Spain, while the waste management business is highly dependent on industrial activity. In Europe, industrial activity is a big risk as we are already seeing within the automotive industry.

They are trying to expand into emerging markets, but you don’t have a moat in this business and you need to be the lowest bidder to win business.

Suez SA change plans – Source: Suez SA 2030 Strategy
Suez SA change plans – Source: Suez SA 2030 Strategy

It is likely that they will not see improved margins from international expansion, plus, it is not going to come for free. Another risk is cheap European money, if that source dries up for whatever reason, companies like Suez immediately become much less competitive globally.

Suez SA Stock financials

Over the last decade, the company did grow revenues, but it did so at the cost of declining operating margins.

Suez stock analysis - stock financials – Source: Morningstar
Suez stock analysis – financials – Source: Morningstar

With a price to earnings ratio of 20, where all the earnings are paid out in the form of dividends (the pay-out ratio was above 100% for 5 years in the last 10 years), it is unlikely you will see something spectacular coming out of this investment. The exposure to industrial activity in Europe makes it extremely risky above book value. If you buy Suez SA stock, you do that with a huge margin of safety below book value and when earnings are negative in a recession or slowdown like it was the case in 2012 when earnings fell 50% and Suez SA stock price was closer to EUR 5.

ven Carlin Ph.D., the author, is an independent stock market researcher and investor managing the Sven Carlin Stock Market Research Platform.

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