Tuesday, July 16, 2013

Analysis of K+S


fertilizer supplier


Company: K+S

Business: The K+S Group is one of the world's leading suppliers of standard and speciality fertilizers. They used to have three parts but since 2011 they discontinued their Nitrogen Fertilizer and today they have: Potash & Magnesium Product as well as Salt. They themselves claim to be the biggest world producer (miner maybe better) of salt.

Active: They have a very strong presence in Europe and North America. A few sites in South America, Africa and in Asia but nothing really to brag about.

P/E: 7.7

Also this company came from a request as can be seen here. If you would like a better analysis of the company as well as their competitor please check out this link to a fellow blogger however it is in German but with Google translator I am sure you will understand what is written.
containing P/E and P/B values as well as dividend
The P/E of K&S is very juicy at the moment with 7.7 and the P/B is acceptable with 1.5 which gives a very clear buy according to Graham. The earnings to sales is surprisingly high with 17% this I really did not expect so very positive news because if we look at more cut-throat businesses they are closer to 3-5%. The book to debt is great with a ratio of 1.1. It looks more like an American company than an European one. The growth has not been so good for the last five years and as seen it is negative 3.9%. This is due to two reasons mainly 2012 was a pretty bad year and also the discontinued Nitrogen business which decreased the yearly revenue by around 0.5-0.9 billion €. Most likely K&S should be able to grow inflation which would give a motivated P/E of around 10-12 which means that the market today is slightly undervaluing K&S. They try to perform some kind of R&D but only 3% of their earnings so maybe they should improve their to strengthen themselves against the competitor. One often believes that nothing can be done in the "boring" old businesses but there one can sometimes make the most interesting discoveries. they pay a dividend that is 5.2% which represents 40% of the earnings which is fully acceptable especially since 2012 was a semi bad year.

Conclusion: K&S is a clear contrarian buy & hold today. They have a solid business and they have been paying dividends since at least 10 years back however they adjust the dividends according to their earnings! Personally I like to buy a little more growth companies but for a strict contrarian K&S looks very good today if one wants to own cheap, solid stocks on DAX.

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