Friday 11 October 2013

Analysis of Fresenius

A German healthcare company with several daughters

Company: Fresenius

Business: A German health care company: They own fully or parts of: Fresenius Medical Care (analysed previously) that work with dialysis, Fresenius Kabi treatment of chronically ill patients, Fresenius Helios which is 74 hospitals and clinics (in Germany mainly) for acute treatment of patients, Fresenius Vamed helps with projects and management business of health care facilities, Fresenius Netcare and finally Fresenius Biotech (both are very small in comparison to the others)

Active: They or their daughter companies are active world wide but with a strong base in Germany and Europe for many of their products / services.

P/E: 17.3

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Fresenius is running for too high with 17.3 and even worse is the P/B that is up at 2.1 which gives a very clear no go according to Graham. Their earnings to sales are ok with 5% and the ROE is so, so with 12.1%. The book to debt I do not really like because it is down at a ratio of 0.4. They have however in the last five years had an excellent yearly growth of 9.4%! Well done! This gives us a motivated P/E of 25 to 28 which means that Fresenius is today undervalued by the market. The spend 33% of their earnings on Research which I find fully acceptable but the dividends are no fun with only 1.2% even though that only represents 21% of their earnings.

Conclusion: Graham says no and so do I. I find the P/E and P/B far too high and I do not like the very low dividends. Also Fresenius are running and the same principle of increasing the dividend and when I looked back 10 years in time they have each year increased it. Still I would prefer to buy this company at a cheaper moment and one day it will arrive upon which it will be an excellent buy and hold company.

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