Thursday, June 27, 2013

Analysis of Skanska


A Swedish construction company


Company: Skanska

Business: A Swedish world leading project development and construction group that is active within Construction, Homes, Commercial property and Public Private Partnerships.
   
Active: Pretty much world wide with strongest focus in Europe, North and South America.

P/E: 16

Also this company came from a request as can be seen here.
 
The P/E for Skanska is currently as high as 16 with a P/B of 2.4 it simply becomes too high for being of any interest according to Graham. The E/S is also not very high with only 2% but this is the first construction company I analyse so it could be that it is always that low. The book to debt is also not that nice with 0.28. The growth in the last five years have been negative 2% which mainly comes from very high revenue in 2008 but still it indicates that it is not a solid growth company. If we would expect a yearly growth of 3% then the motivated P/E would be around 10 which Skanska is already trading above with its 16. they pay a very nice dividend with 5.4% however this represented 87% of their earnings last year which means that unless they improve their earnings they can forget about keeping up that kind of dividends payment.

Conclusion: I find that Skanska is today too high valued on the market especially since I do not really see them being able to keep up with the dividends payment and when and if they cut that further then the stock price will almost certainly drop. I´m sure there are better/cheaper companies.

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