Eni (BIT:ENI) is back in focus after approving a $4 billion third phase of its Baleine offshore project in Ivory Coast and expanding a renewable HVO biofuel partnership with BMW’s European corporate fleets.
See our latest analysis for Eni.
Despite the latest Baleine investment and HVO biofuel agreement with BMW grabbing attention, Eni’s share price has eased over the past quarter, even though the year-to-date share price return is 29.87% and the 1-year total shareholder return is 58.32%, pointing to strong longer-term momentum after recent weakness.
If this mix of oil, gas and low carbon projects interests you, it could be a good time to broaden your watchlist with our 34 power grid technology and infrastructure stocks
After a strong 1 year total return of 58.32% and a more than 90% gain over 3 years, yet a share price that has slipped around 9% over the past quarter, does Eni still offer an appealing risk reward trade off at today’s €21.25 price?
Most Popular Narrative: 16.3% Undervalued
At a last close of €21.25 versus a widely followed fair value of €25.40, the current Eni share price sits below what this narrative considers reasonable based on long term cash generation and capital returns.
Eni's upstream strategy focusing on organic production growth via exploration successes in Namibia, Ivory Coast, and Norway, ramp ups in Indonesia/Malaysia with Petronas, and targeted portfolio optimizations is expected to lift production, strengthen free cash flow, and underpin robust cash returns to shareholders.
Curious what kind of revenue path, margin uplift and future earnings multiple have to come together to support that higher Eni fair value? The underlying narrative leans on a specific mix of LNG growth, lower carbon businesses and capital returns that all feed into that outcome, but the exact balance is only clear once you see the full set of assumptions.
Result: Fair Value of €25.40 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this upside case for Eni can be knocked off course if LNG projects face delays or cost overruns, or if Versalis restructuring progress falls short.
Find out about the key risks to this Eni narrative.
Another View on Eni’s Valuation
While the narrative fair value of €25.40 points to upside for Eni, the current P/E of 22.9x is higher than both the European Oil and Gas industry at 16.2x and peers at 13.8x, although still below a fair ratio of 27.3x. Is that a valuation cushion or a warning light?
Our preferred multiple work shows the market already pays a premium versus industry and peer averages, even if the fair ratio suggests some headroom. It is worth asking how comfortable you are with that gap before considering any additional exposure. See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If the mixed signals around Eni leave you unsure, take a closer look at the full picture and decide quickly for yourself using the 3 key rewards and 1 important warning sign.
Looking for more investment ideas beyond Eni?
If Eni has caught your attention, do not stop here. Use these focused stock lists to quickly surface fresh ideas that could sharpen your portfolio thinking.
- Spot potential bargains early by reviewing companies filtered as 218 high quality undervalued stocks.
- Strengthen your income stream by assessing businesses highlighted as 465 dividend fortresses.
- Protect your capital by scanning companies assessed as 297 resilient stocks with low risk scores.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com