Pennon Group PNN.L
United KingdomUtilities · Utilities - Regulated WaterLondon Stock Exchange · GBP
5.70 GBP (+57.8%)
12 analysts
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Pennon Group is a UK water and wastewater services company, operating through its subsidiary South West Water, providing regulated water supply and sewerage services in the southwest of England.
Listed on London Stock Exchange · Symbol PNN.L · LON: PNN · Currency GBP
Key points
from its scores- ✓Strong growth8.4
- ✓Favourable backdrop8.1
- ✕Poor share-price trend3.0
- ✕Fragile balance sheet3.6
- ✕Little competitive advantage3.7
AI analysis
bottom line, main risk, context and newsThe high dividend and revenue growth do not compensate for the risk of an over-leveraged balance sheet and non-existent dividend coverage.
Pennon Group shows solid revenue growth (21.7%) and an attractive dividend (8.03% net), but its financial health is very weak: net debt is 9.04 times EBITDA and cash conversion is negative (-67.78%), making the dividend (payout of 148.65%) unsustainable and the balance sheet vulnerable to a rising rate environment.
The main risk is extreme leverage (Net Debt/EBITDA of 9.04x) combined with negative cash generation, which jeopardizes dividend sustainability and financial solvency if interest rates continue to rise or the regulator Ofwat imposes tariff cuts.
Context and risks
Pennon Group operates in a regulated sector (water) in the UK, where the regulator Ofwat exercises strict control over prices and allowed returns. The company has extreme leverage (Net Debt/EBITDA of 9.04x) and negative cash conversion, making it vulnerable to regulatory pressure and a rising interest rate environment in the UK, which makes its high debt burden more expensive.
Is Pennon Group stock cheap or expensive?
at the analysis dateOn P/E and EV / EBITDA, it trades in line with the Utilities median (within 15%).
| Multiple | Company | Sector | Difference |
|---|---|---|---|
| P/E | 19.0 | 19.1 | −0% |
| EV / EBITDA | 12.4 | 12.2 | +2% |
| Price / book | 1.2 | 1.9 | −38% |
| Price / sales | 1.3 | 2.6 | −49% |
Sector: median of the 92 Utilities companies analysed. In bold, the multiples used for the comparison.
Valuation score: 5.0 out of 10 (median for Utilities: 4.8).
Average analyst target: 5.70 GBP, +57.8% versus the price.
Classic formulas with standard assumptions (10.0% growth, 8-9% discount rate). Indicative only: they change a lot with the assumptions and are not a recommendation.
Work out its fair value yourself →How much would you have made investing every month? →
Comparing it with its sector does not say whether it is a good buy: this is not investment advice.
Score by category
0 to 10 · hover overtap each one to see what it measuresKey metrics
at the analysis date · compared with the Utilities medianValuation
- P/E
- 19.0
- Forward P/E
- 10.8
- EV / EBITDA
- 12.4
- Price / book
- 1.2
- Price / sales
- 1.3
- PEG
- 6.93
- Market cap
- 1.7B GBP
- Enterprise value
- 6.3B GBP
Profitability
- ROE
- 6.5%
- ROA
- 2.7%
- ROIC (approx.)
- 5.1%
- Gross margin
- 97.0%
- Operating margin
- 25.1%
- Net margin
- 7.1%
- Free cash flow
- −342.2M GBP
- FCF yield
- −20.1%
- Cash conversion
- −68%
Solvency
- Total debt
- 4.9B GBP
- Net debt
- 4.6B GBP
- Cash
- 333.3M GBP
- EBITDA
- 504.9M GBP
- Net debt / EBITDA
- 9.04
- Debt / equity
- 347.10
- Current ratio
- 1.51
- Quick ratio
- 1.32
Growth
- Revenue growth
- +21.7%
- EPS (TTM)
- 0.19 GBP
- EPS (forward)
- 0.33 GBP
Dividend
- Dividend yield
- 8.0%
- Payout
- 148.6%
Risk and market
- Beta
- 0.55
- Analyst consensus
- Buy (12)
- Target price
- 5.70 GBP
Recent news
All PNN.L news →Compare it with its sector
All 92 in Utilities →Frequently asked questions about Pennon Group
Is Pennon Group stock cheap or expensive?
On P/E and EV / EBITDA, it trades in line with the Utilities median (within 15%). Valuation score: 5.0 out of 10 (median for Utilities: 4.8). Average analyst target: 5.70 GBP, +57.8% versus the price. This is not investment advice.
What score does Pennon Group get on MeridIAn Screener?
It scores 5.1 out of 10, rank 1,662 of 2,130 (better than 21% of the companies analysed). Its strongest category is Growth (8.4) and its weakest, Momentum (3.0). Analysis of 08/10/2026.
What is Pennon Group's P/E ratio?
Its P/E is 19.0: the share price equals 19.0 times earnings per share over the last 12 months. The Utilities median is 19.1. Based on the earnings analysts expect, the forward P/E is 10.8.
How much is Pennon Group worth on the stock market?
Its market capitalisation is 1.7B GBP and its enterprise value, debt included, is 6.3B GBP.
How much debt does Pennon Group have?
Its net debt (debt minus cash) is 4.6B GBP. That is 9.04 times its EBITDA; the Utilities median is 5.33.
Does Pennon Group pay a dividend?
Yes: its dividend yield is 8.03% and it pays out 149% of its earnings.
How has Pennon Group stock performed over the last year?
It has fallen 26.3% over the last year, excluding dividends. Over the last 52 weeks it has traded between 0.00 and 6.05 GBP. Past performance does not guarantee future results.
What do analysts think of Pennon Group?
12 analysts cover it; their average recommendation is “Buy” and their average target is 5.70 GBP (+57.8% versus the price). It is an estimate, not market data.