Fac­ing chal­lenges

Finweek English Edition - - Market Place -

EOH shares fell to their low­est level in three years as they traded at 9 600c af­ter a high of over 16 000c last year. At cur­rent lev­els the stock trades at a cheap his­toric price-toearn­ings (P/E) ra­tio of around 13.5 times, but the com­pany is fac­ing chal­lenges re­gard­ing its growth strat­egy. His­tor­i­cally, EOH has grown or­gan­i­cally and via ag­gres­sive ac­qui­si­tions, us­ing its shares to buy busi­nesses. The prob­lem now is two-fold. Cheaper shares mean less bang for a buck when buy­ing busi­nesses. Se­cond, at its large size, ac­quis­i­tive growth is much more dif­fi­cult to achieve. This is be­cause it needs big deals to make a dif­fer­ence to prof­its and the big­ger the deal, the higher the risks. Re­sults are due mid-Septem­ber and I would wait to see what they look like be­fore mak­ing any de­ci­sions on whether to buy or sell.

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