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How to buy Eletrobras stocks in 2022

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Author: Mircea Vasiu Updated: August 1, 2022

Eletrobras is the largest company in the electric energy sector in Latin America. It accounts for 29% of installed generation capacity in Brazil. It also operates a total of 1,500 kilometres of transmission lines connecting countries such as Argentina, Uruguay, and Venezuela.

Eletrobras stocks are listed on the New York stock exchange under the ticker EBR and, like any utility company, it has a big dividend payout ratio. In 2020, Eletrobras ran over 50,000 MW in installed capacity, generating close to 200,000 GWh, out of which approximately 97% came from clean generation sources.

The company operates a mix of hydro, nuclear, wind, and solar sources to produce electricity, and only about 3% of the generation output comes from thermal power plants. This article aims at providing a full image of Eletrobras and to act as a guide to those wanting to buy Eletrobras stocks.

How to Buy EBR Stocks in 5 Easy Steps

  1. 1
    Visit eToro through the link below and sign up by entering your details in the required fields.
  2. 2
    Provide all your personal data and fill out a basic questionnaire for informational purposes.
  3. 3
    Click 'Deposit', choose your favourite payment method and follow the instructions to fund your account.
  4. 4
    Search for your favourite stock and see the main stats. Once you're ready to invest, click on 'Trade'.
  5. 5
    Enter the amount you want to invest and configure your trade to buy the stock.

Everything You Need To Know About Eletrobras

The following section of this article covers the company's business in more detail. We will have a look at Eletrobras's history, strategy, revenue sources, and how Eletrobras's share price has performed in recent years.

Eletrobras History

Eletrobras was founded in Rio de Janeiro in 1962. The company is owned by the Brazilian government and by December 2020 it had 4.7 GW of installed generation capacity outside Brazil.

What Is Eletrobras's Strategy?

It controls a group of generation and transmission companies such as Eletronorte, Eletrobras Eletropar, or CHESF (Compnahia Hidro-Eltrica de Sao Francisco). The first one is responsible for energy power, generation, and distribution in states such as Amapa or Mato Grosso. The second one holds a participation in other energy companies, and the third one powers the northeast Brazil cities. These are just a few examples of the companies Eletrobras owns or controls.

Together with its subsidiaries, it operates and controls 31 hydroelectric plants, 7 thermal plants, as well as two nuclear plants. In other words, it operates as an integrated electric company in Brazil and Latin America.

How Does Eletrobras Make Money?

Eletrobras sells electric energy to households and businesses in Brazil and other countries in Latin America. It owns about 40% of Brazil's generation capacities and controls almost 70% of the National Interconnected System.

How Has Eletrobras Performed in Recent Years?

Eletrobras' stock price has traded below $10 after the COVID-19 2020 pandemic. The market formed a head and shoulders pattern with the highest price in the head part of the pattern being $11. The failure at the $10 shows the stiff resistance lying there, and during the pandemic-led market selloff, Eletrobras shares dropped more than 50% from their 2020 highs. However, the stock price recovered most of the lost ground, as the world sees the light at the end of the tunnel as the COVID-19 vaccination pace gains ground.

Eletrobras Fundamental Analysis

The next section of this article focuses on Eletrobras's fundamental analysis. We will cover things such as the company's revenue, earnings-per-share, price/earnings ratio, dividend yield, and cash flow.

Eletrobras's Revenue

Revenue is the first item on the income statement and shows how much the company has sold over a period. Investors should be aware that the income statement is a reflection of the financial performance of a period, typically one fiscal year and it starts with how much the company sold in that period.

Eletrobras generates revenues close to 33 billion Brazilian reals, or about $6 billion in 2021, and revenues are projected to remain relatively stable in the years to come. For a utility company like Eletrobras, this is one of its strengths – the ability to project steady revenues for years ahead.

Eletrobras’s Earnings-per-Share

Earnings-per-share or EPS is a financial metric that shows just how much the company has earned in profits per one single share. The higher the number, the better for investors, as it shows increased profitability.

Eletrobras's estimates for the 2021 EPS are BRL5.43, expected to reach 5.93 by 2023.

Eletrobras’s P/E Ratio

The P/E or price/earnings ratio is one metric used by investors to valuate a business. A higher P/E ratio is not desirable because it shows in how many years your investment is recovered should the company's profitability remain the same.

Eletrobras's P/E ratio for 2021 is estimated at 7.02, meaning that investors are willing to pay $7.02 for every dollar that the company makes in profit. For the years ahead, the P/E ratio is projected to drop to 6.42 by 2023 and then rise to 14.32 by 2025.

Eletrobras’s Dividend Yield

A dividend yield is a financial ratio telling the percentage of the dividend paid at the current price. Effectively, it is calculated as the ratio between the annual dividends per share and the current share price and a higher dividend yield is attractive for dividend-seeking investors.

Eletrobras has a dividend yield trailing 12 months (TTM) of 8.51%, which is much higher than the 3.39% sector median. The ability to pay a dividend to its shareholders is one of the most attractive things about a utility company and utilities are part of every dividend-seeking portfolio strategy.

Eletrobras’s Cash Flow

Another financial metric to consider when valuing a business is cash flow. It shows the company's ability to meet short, medium, and long-term liquidity needs and the free cash flow is of particular importance.

The free cash flow shows how much cash remains in the company after all costs of doing business are covered. Naturally, the higher the number, the better, because the cash generated can be used to fund expansion plans, such as opening new markets or launching new products. Also, the cash can be used to pay down debt, thus improving the solvency ratios and making the company more attractive in the eyes of investors.

Eletrobras free cash flow is expected to improve significantly in the years ahead, estimated to grow by about four times compared to the 2021 levels.

Why Buy Eletrobras Stocks?

Here are a few reasons why you might want to buy Eletrobras stocks:

  • Steady revenue stream;
  • Dividend-paying company;
  • Almost all energy generated comes from renewable sources;
  • Growing free cash flow available to the firm in the years ahead.

Expert Tip on Buying Eletrobras Stock

As a utility company, Eletrobras has the advantage of steady revenue flows. The business uncertainty, therefore, is insignificant, especially considering the fact that this is the largest utility company in Latin America.
- Mircea Vasiu
Buy Eletrobras Stocks Today!

5 Things to Consider Before Buying Eletrobras Stock

Here are five things to consider before buying Eletrobras stock.

Understand the Company

Make sure you understand the company's business. Ideally, as an investor, you should pay attention to industry trends, regulations in the main markets, what are the risks ahead, and what might affect the business in the years ahead.

For a utility stock like Eletrobras, things like the changes in the customer base may be important, as well as what the company is doing to attract new customers (e.g., investing in new infrastructure, plans to expand to other markets, etc.).

The more data and info you have about the company, the better informed you are. Also, make sure to check the available info on the company's website, read and interpret the financial statements, as well as the forward guidance provided by the management.

Understand the Basics of Investing

Investing is not only for those who study economics, but it surely helps to understand some economic terms as well as investing ones. Things like financial ratios or money management rules do help in the investing process. Also, as an investor, you may want to make use of all the tools offered by the broker, such as the types of pending orders that help you manage the risk better.

Carefully Choose Your Broker

The stockbroker plays an important role in the investing process. Not all brokers are the same, and therefore due diligence is needed in order to pick the right one.

One thing is sure – you'll want to trade with a regulated broker. Unfortunately, not all brokers are regulated, and the presence of a financial authority that regulates the broker's activity is good for its customers. Some brokers choose to skip the regulation process because of its high costs, but it is a bad signal about the way the broker conducts business. Also, try to find out if the broker offers negative balance protection or if it segregates the customers' funds from the funds needed for the day to day business.

Decide How Much You Want to Invest

This is perhaps the most tricky part of the investing process. People are attracted to financial markets by the desire to gain some extra funds but everyone wants to become rich quickly. Because of that, errors are made, and in some cases, they lead to big losses.

Money management rules help protect an account while giving it room to grow. For example, instead of investing all of the funds in one single company, you might want to diversify your portfolio and, with it, the risk. Instead of buying one utility in one country, you might want to split the investment into multiple utility companies in different regions, thus spreading the risk of one single investment going wrong. Also, diversification works by adding to a portfolio uncorrelated assets.

Decide on a Goal for Your Investment

What is the reason you want to invest? This question, while simple, may hold the key to the strategy to be deployed.

Some traders invest for retirement. Therefore, they prefer a buy and hold approach, and the entry price is not necessarily important when you plan to hold a stock for years or decades.

Some other traders like to speculate on a stock's volatility. For them, technical analysis and fundamental analysis are important, as well as the economic releases that influence the prices every day.

All in all, the more clarity you have with what you want from your investments, the easier it is to manage the portfolio.

The Bottom Line on Buying Eletrobras Stocks

Eletrobras is the largest company in the electric energy sector in Brazil and Latin America. It is active in the generation, transmission, and commercialisation of electric energy, with almost all of it coming from renewable sources. This is a utility company, thus a dividend-paying one, with a high dividend yield and plans of expansion in Latin America. The cash flow position is set to improve in the years ahead, expected to rise four times by 2025 and beyond.

For those ready to invest in Eletrobras stocks, the next thing to do is to find a brokerage house that offers Eletrobras shares to trade. This article gives you a shortlist of such brokers, and then simply search in the database to find the company and shortlisted in the wishlist or in the favourites list. Finally, place an order or trade at the market price.

Trading at the market price means that the broker will use the current market prices to execute the order, while trading with pending orders means that the price needs to reach a certain level before an order gets executed. For example, if you want to buy from higher levels than the current market price, you might want to use a pending buy stop order and the broker will execute it only if and when the price reaches that level.

On the other hand, if you feel you are not ready and confident to invest yet, there are plenty of additional educational resources on our website. Make sure you read more about the investing process and how investing works. Ideally, open a demo account with a brokerage house to test the market using virtual funds and become familiar with the broker's offering as well as with the market's volatility.

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Frequently Asked Questions

  1. That would be hydro energy. Out of the approximately 97% clean generation sources used by Eletrobras, hydro accounts for 91.3%. The rest belongs to nuclear (3.9%), wind (1.4%), and solar (1%). Coal, diesel oil and natural gas represent only a small share in the Eletrobras installed capacity.

  2. Most of the company's operations are in Brazil, but recently it tried to expand in other regions. As such, it is working on the development of the Arco Norte Project, a 1,900 kilometer transmission system traversing Brazil, Guyana, Surinam, and French Guiana. It also operates 1,500 kilometers of transmission lines in countries such as Venezuela or Argentina.

  3. Eletrobras has put a strong emphasis on ESG – it received a bronze award in The Sustainability Yearbook 2021, a publication that lists the world's most sustainable companies. The list covers over 7,000 global companies from various industries and ranks them based on their scores on economic, environmental, social, and governance metrics.

  4. Eletrobras is listed on the local B3 (Brasil, Bolsa, Balcao), a stock exchange located in Sao Paulo, Brazil. It is also listed on the Madrid stock exchange as well as on the New York Stock Exchange. Eletrobras is part of the Ibovespa index, a benchmark index of 83 stocks trading on the B3.

  5. One solution is to book partial profits when the stock price rises and move the stop-loss order to break even. This way, you're set to make a profit even if the move higher turns out to be a false one. Another is to simply use a trailing stop order, meaning that the stop-loss order follows the move higher in price and it adjusts to higher levels automatically.

  6. This is part of the money management system and it involves the use of a stop-loss order. Such an order instructs the broker to automatically close the position. Some traders prefer to have a "mental" stop-loss order, meaning that they will close the investment manually once the bullish case is not valid anymore, but this is risky because the market may move too fast.