The stock forcefully approaches new pivot levels

10/06/2017 | 09:36am

E.ON shares are reaching an interesting resistance zone. The current technical chart pattern suggests that a breach of this level could lead to new upside potential.

Summary

● The company has solid fundamentals for a short-term investment strategy.


Strengths

● The company has attractive valuation levels with a low EV/sales ratio compared with its peers.

● Its low valuation, with P/E ratio at 6.37 and 13.92 for the ongoing fiscal year and 2018 respectively, makes the stock pretty attractive with regard to earnings multiples.

● This company will be of major interest to investors in search of a high dividend stock.

● For the past twelve months, EPS forecast has been revised upwards.

● For the past year, analysts covering the stock have been revising their EPS expectations upwards in a significant manner.

● Within the weekly time frame the stock shows a bullish technical configuration above the support level at 7.48 EUR


Weaknesses

● The share is close to its long-term resistance in weekly data. Therefore, the potential should be limited. However, a further bullish movement when crossing this resistance will be a positive signal.

● Technically, the stock approaches a strong medium-term resistance at EUR 9.69.

● According to Thomson-Reuters' forecast, revenue growth prospects are expected to be very low for the next fiscal years.

● The company is in debt and has limited leeway for investment

● Sales estimates for the next fiscal years vary from one analyst to another. This clearly highlights a lack of visibility into the company's future activity.

● Financial statements have repeatedly disappointed market stakeholders. Most often, they were below expectations.

● For the last twelve months, sales expectations have been significantly downgraded, which means that less important sales volumes are expected for the current fiscal year over the previous period.

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