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Bouygues SA – Take it slowly with dividends

Bouygues SA, together with its subsidiaries, operates in the construction, telecom, and media sectors in France and internationally. The company designs, builds, renovates, operates, and deconstructs building, infrastructure, and industrial projects; develops urban planning, residential, and commercial projects; constructs and maintains roads and motorways, airport runways, ports, industrial logistics, and commercial hubs, urban roads and amenities, external works, reserved-lane public transport facilities, leisure facilities, and environmental amenities, as well as undertakes civil engineering activities; produces and recycles construction materials; and distributes bitumen. It also engages in the construction, renewal, and maintenance of rail networks; fitting of road safety and signaling equipment; and laying and maintenance of pipes and pipelines.

S&P Rating: A- Market Cap: €10.0b
US Ticker Symbol: BOUYY
EU Ticker Symbol: EN

Interesting news about the Company:

Didier Casas, 52 years old, is taking over from Arnaud Van Eeckhout as Group General Counsel with effect from 10 October.

Bouygues completed the acquisition of Equans, a key milestone in its development.
The final purchase price for Equans shares is €6.1 billion. After factoring in the net debt of Equans on the day of acquisition, the impact on the net debt of Bouygues is €6.5 billion (including €130 million paid to Engie on 12 May 2022 on signature of the Share Purchase Agreement). Thanks to this transaction, Bouygues becomes a world leader in the promising multi-technical services market which is at the heart of the environmental, industrial, and digital transitions. 

Current situation and some numbers…

We can see from the most recent balance sheet that Bouygues had liabilities of €23.2b falling due within a year, and liabilities of €11.4b due beyond that. Offsetting these obligations, it had cash of €4.59b as well as receivables valued at €15.5b due within 12 months. So it has liabilities totaling €14.6b more than its cash and near-term receivables, combined. Given this deficit is higher than the company’s massive market capitalization of €11.2b, we think shareholders really should watch Bouygues’s debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company was forced to pay down its liabilities by raising capital at the current share price.

Besides that, I have the FastGraphs subscription to show you how it performed its ADR stock named BOUYY. The price chart looks the same when you google the EN ticker in the European market. Price wasn’t that volatile over the years but it is declining since 2007 November. Overall the Return on the investor’s money is 0.4% because the stock price is dropping but you receive some dividends.

Bouygues’s 5-Year EBITDA growth rate is 4.20%. Therefore, Bouygues’s PEG Ratio for today is 2.33.Right now the stock is in the good “Margin of Safety” territory.

Dividend Standpoint

Bouygues has a record of 22 years of dividend payments. The current dividend yield is on every platform a little bit different because of the US stock and on other markets but the original French market is 6.94%. The total maintained years are 13 and they pay dividends out only 1 time a year. The dividend growth rate was a bit volatile over the last 10 years but averaged 1-2% which isn’t a good number for a company of this size. Share buybacks can be a silent killer. If the company does not buy back shares but dilutes them then your investments are worth less over time. It is like a slice of cake where your slice will be smaller if the company dilutes its shareholders.

Unfortunately, Bouygues issues share every year.

A payout ratio is a ratio where we can decide if the company is capable to manage its dividend payouts or not. This ratio at EN was always between 40-50% compared to their Free Cashflow.


The 11 analysts offering 12-month price forecasts for Bouygues SA have a median target of 37.33eur. The median estimate represents a +43.87% increase from the last price.

Fair value

I use the most widely accepted method to calculate the fair value of a company which is the Discounted Cash Flow(DCF). It is based on the premise that the fair value of a company is the total value of its future free cash flows discounted back to today’s prices. I use analysts’ estimates of cash flows and assume the company grows at a stable rate into perpetuity.

(Total Equity Value = Present value of next 10 years cash flows + Terminal Value = €9 490 + €10 857= €20 347,02
 Equity Value per Share (USD) = Total value / Shares Outstanding = €20 347 / 377 = €54)

Undervalued by 50.8%. The current fair value is €54.

Closing Thoughts

I’m not impressed by Bouygues SA. Although fundamentals look decent the overall return doesn’t even come close to inflation. The low earnings growth is a bit concerning, especially given that the company has a high rate of return. As discussed earlier, the company is retaining a small portion of its profits. With that said, I studied the latest analyst forecasts and found that while the company has shrunk its earnings in the past, analysts expect its earnings to grow in the future.

 I remain bearish about the company for now. 

Disclosure: I have no stock, option, or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

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