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EDP Renováveis : equity valuation dissertation
| Name: | Description: | Size: | Format: | |
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| 1.75 MB | Adobe PDF |
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Abstract(s)
This work focuses on evaluating EDP Renováveis in order to get a fair stock price of the firm. Our main conclusion is that the firm is currently undervalued, presenting a good investment opportunity. We firstly revise the current valuation methods, which led to value the company through the DCF, EVA and multiples approaches. For the DCF an EVA valuations, three scenarios, all based on the evolution of installed capacity of EDPR were created, so the uncertainty related to the company’s growth could be accounted for. We also analyze various studied produced by some of the most important energy Agencies, in which we concluded that the future for the renewables sector is very promising since its capacity is forecasted to almost treble throughout the next 25 years. Since renewables capacity is expected to increase over the next years, and we assumed EDPR to take advantage of this trend, thus, our stock price reached through DCF led to an undervaluation of about 16%. This results are reinforced when using enterprise values multiples, nonetheless, the EVA valuation led to an overvaluation of just 0.79%. Moreover, our valuation price target was compared to the valuation of an Investment Bank and the results were similar, with our DCF price being €7.34 and the Bank reaching €7.50. In both cases the key value driver were additions in capacity.