Thursday 5 December 2013

Analysis of Fuchs Petrolub

A German lubrication production company

Company: Fuchs Petrolub SE

Business: A German lubrication producing company. They apparently have a product range of  several thousand lubricant products (sounds like a lot! too many?) for all applications and industries. Their customer base is therefore also broad ranging from: mining and steel industries to farmers,  transport companies, and pharmaceutical industry.

Active: For sales their biggest markets are Western Europe, North America and Asia. For production they are spread out also in Africa and South America.

P/E: 23.7

contrarian values of P/E, P/B, ROE as well as dividend
The P/E is far too high for my liking for Fuchs Petrolub with 23.7 and the P/B is also far off my scale with 6.3 which means that Graham says no to this investment. The earnings to sales are however great with 11% and the ROE is truly excellent with almost 27%! The book to debt is also great with a ratio of 2.4. In the last five years they have had a nice yearly growth of 5.5% which gives us a motivated P/E of 16 to 20 which means that they are only slightly overvalued by the market today. They make sure to stay ahead or even with their competitors and spend almost 15% of their earnings on research which is good and could maybe have been a little higher. They pay a very tiny dividend of 1.9% which represents almost 45% of their earnings so not something I like.

Conclusion: I say no to this company as do Graham. If one is going for high ROE then this would be a company of interest especially since the company is only slightly overvalued today on the market and the growth has been good and pretty solid in the last five years... but it is not for me.

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