Wednesday 6 November 2013

Analysis of Aurubis

A German copper producer and recycler

Company: Aurubis

Business: A German company with main focus on the production and recycling of copper. They have three business units: Primary Copper (production of copper and copper cathodes from raw material meaning copper ore), Recycling/Precious Metals (are producing copper cathodes from recycled copper in electronic equipment etc. as well as precious metals are then also being recycled) and finally Copper Products (value-added chain of copper products making wires, rolls and rods).

Active: Production sites in Europe and the US and product sales besides from the two mentioned also in Asia.

P/E: 5.9

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Aurubis is excellent with 5.9 and the P/B is not bad at all with 1.0 which gives us a very clear buy according to Graham. The earnings to sales are not very good since it is only 3% but the ROE is fully acceptable with 16.5%. The book to debt is also ok with a ratio of 0.8. In the last five years they have and an excellent yearly growth of 10.5% and this gives us a motivated P/E of 26 to 29 which means that the stock is highly undervalued on the market today. They pay an acceptable, but not more, dividend of 2.9% which however only represents 16.8% of their earnings so they have plenty of room to keep alternatively increase it even further.

Conclusion: I must admit that I was surprised to find this company on MDax since MDax is currently on an all time high. They have an excellent P/E and P/B, the ROE is fully acceptable for a boring metal industry company, their growth has been excellent in the last couple of years and the dividend they pay are acceptable. It must be mentioned that Aurubis is having a difficult year now (they claim due to decreased copper prices) and I would classify it as a turn-around company but I seem to have a liking for those which is also hurting my stock portfolio. Anyway Graham considers it to be a buy and so do almost also I. Aurubis will soon arrive with their full year report (16th of December) and I am uncertain how that will be accepted. There is a chance that the stock will drop even further and the rules is usually to see that a company has started to turn around before one makes the investment. One might loose some %-age increase due to that but compared to a slow turn around it is better to loose those %-ages. I will therefore wait with making an investment and will observe what happens.

Aurubis will be added to the Stock of Interest page with the next update.

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