Thursday, 26 September 2013

Analysis of Guideline Geo

A Swedish geotechnology company

Company: Guideline Geo

Business: A Swedish company that are active within geophysics and geotechnology. They have three focus areas: Water - finding water in areas where it was not previously known to exist, Environment - mainly mapping of suburban areas to find best location for a city to expand and finally Infrastructure - where they aid with construction and maintenance. The company is built up by Abem, which has been around since 1923, and Malå.

Active: They are pretty global. At least they claim to have customers in over 100 countries.

P/E: 6.1

This company was analysed due to a request that can be found here.
contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Guideline Geo is very good with its low 6.1 and the P/B is also very nice with 1.0 which according to Grahams formula gives a very clear buy. The earnings to sales are also very nice with 17% and they ROE is looking good with 15.8%. The book to debt is very good looking with a ratio of 3.2. Looking at the last five years then they have had a yearly growth of 4% which I would have expected to be more due to the niche they are active in but that maybe tells more about the need of the company´s services. This would anyway lead to a motivated P/E of 13 to 15 which means that the market today is undervaluing the company. They pay no dividend which is bad.
Conclusion: Run away! This company looks very good when looking at it with the contrarian analysis approach but then one must always look upon everything slightly critical and in this case that comes via the continuous issuing of new shares. In the last seven years they have issued new shares 12 times! This is the only reason for why they have so low debt because they feed on their shareholders. For a venture capitalist this is fine but as a small investor it is not. So please stay away from this company until they show better stability and they start to live on their own earnings.
Last year was the first year in 7 years that they showed a profit. Maybe they have started to do better and maybe it is a good moment to step in if it is on its way to turn around but that would need to be followed very carefully and in my opinion... there are other safer, cheaper companies out there.

If this analysis is outdated then you can request a new one.

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