Is Rexel (ENXTPA:RXL) Cheap Following Its €500 Million Equity Offering?
Rexel (ENXTPA:RXL) has just completed a follow on equity offering of about €500 million, issuing 14,388,490 new ordinary shares at €34.75. Fresh capital changes the equation for both ownership and future flexibility.
Rexel’s follow-on offering lands after a choppy spell, with the latest share price at €34.11 and the 30 day share price return down 6.57%, even as the 1 year total shareholder return of 25.50% and 5 year total shareholder return of 136.03% point to momentum built over the longer haul.
Scan how Rexel's capital raise compares with other potential opportunities by lining it up against our curated 43 power grid technology and infrastructure stocks in the wider power and electrical infrastructure space.
Rexel appears to be a solid electrical distributor with global reach and fresh equity firepower. The real tension sits in a simpler place: Are you now paying a fair price for that strength?
Most Popular Narrative: 17% Undervalued
Against the last close at €34.11, the most followed narrative on Rexel points to a fair value of €41.21. This frames the fresh equity raise against expectations for steadier earnings and modestly higher margins over time.
The ongoing rollout and adoption of Rexel's digital sales channels (now at 34% of group sales and 43% in Europe) and digital procurement capabilities are enabling improved operational efficiencies and customer retention, which should result in better productivity, enhanced net margins, and structurally higher earnings over time.
See why 7 investors see Rexel as 17% undervalued.
The narrative uses a discount rate of 9.0% and assumes revenue of €23.1b and earnings of €973.0m by 2029, tied to a future P/E of 16.2x. That mix of growth and profitability assumptions underpins the €41.21 fair value that currently sits above Rexel's share price and implies investors are being asked to weigh execution on digital, services and capital allocation against a higher earnings base.
Result: Fair Value of €41.21 (UNDERVALUED)
Still, Rexel’s reliance on weaker European demand and its higher financial leverage leave the bullish margin story exposed if sales soften or if financing conditions tighten.
Find out about the key risks to this Rexel narrative.
Next Steps
Mixed signals around Rexel's fresh capital and valuation story only matter if you test them yourself and decide where you land, so pressure test both sides of the argument through the 3 key rewards and 2 important warning signs.
Looking for more ideas beyond Rexel?
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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.
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