Thursday 16 January 2014

Analysis of SGL Carbon

A German graphite and carbon fibres company

Company: SGL Carbon

Business: A German manufacturer of carbon-based products ranging from carbon and graphite products to carbon fibres and composites. They are divided into six business units: Graphite and Carbon Electrodes (used for steel production), Cathodes and Furnace Linings (for the production of aluminium and pig iron), Graphite Specialties (specialty molded graphite products), Process Technology (graphite heat exchangers) Carbon Fibers and Composite Materials (high performance products of carbon, glass and aramid fibres) and finally Aerostructures (and composites of carbon fibres).

Active: They are present with sales network in around 100 countries and production in 44 countries. Major presence is in Europe followed by the US and Asia.

P/E: 298 (P/E5 over 30)

contrarian values of P/E, P/B, ROE as well as dividend

The P/E is very high for SGL Carbon with 298 (last year was very bad but still they are expensive!) and the P/B also too high with 2.0 which gives a very clear no from Grahams formula. Earnings to sales were almost none existing last year and the ROE ended up at less than 1%. The book to debt ratio was so, so with 0.7. In the last five years they have had a yearly growth rate of 1.2% which is bad and this gives us a motivated P/E of 8 to 10 which means that it is highly overvalued on the market today. They pay a silly dividend of 0.7% which represented almost 200% of their earnings so they better start making more money and fast!

Conclusion: Neither Graham nor I find this company of interest. It is simply too expensive not only today but also when looking at the P/E5 of it considering the poor growth they have had. Their products are however very interesting and have fascinating application possibilities but that still does not justify the current high valuation.

If this analysis is outdated then you can request a new one.

No comments: