Saturday 11 May 2013

Analysis of Metro

A German consumer electronics company

Company: Metro

Business: Mainly consumer electronics. Having more or less monopoly on the German market by having both Saturn as well as mediamarkt. Can therefore without too big problems expand into other markets carrying big losses such as their current establishment in Sweden where several electronic chains have gone insolvent due to the competition.

Active: Main focus and the backbone is Germany. From there expanded to several other European markets.

P/E: 15.9

The running P/E is not very good due to a couple of bad quarters in 2012 still the P/E is almost 16. the price to book is down at 1.3 which is good. This gives according to Graham 20.5 which is a buy already with the extremely bad earnings in 2012. The earnings to sales is very bad, ver bad indeed with only 1% this must improve. The book to debt is also not very encouraging. In the last five years they have decreased by -0.4% I wonder if this comes from the establishment of Amazon in Germany. Many goes to the stores and check out the product and then go back home or already on their smartphone order the product cheap online. Graham and Lynch gives a motivated P/E of less than 10. They pay a good dividends of 4.4% which unfortunately is almost 70% of the earnings meaning that if things do not change then they need to decrease the dividends. Addional comments they made extremely bad reports and it was annoying to read them and to try to figure out the "real" earnings and revenues. This should be very clear and very easily represented why should I otherwise invest in the company?

Conclusion: I would not invest in Metro today. They need to improve their earnings before they would even be close to being of interest. I would probably prefer Best Buy to Metro. The interesting thing is that Best Buy has been struggling longer with Amazon and seems to do it pretty ok.

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