Thursday 30 January 2014

Analysis of Wincor Nixdorf

A German IT service and hardware provider

Company: Wincor Nixdorf

Business: A German service company for IT solutions. They have two focus groups retail banks and retail industry. The company is divided in three groups: Technology Manufacturer (cash and check out systems), Global Solution Provider (software and hardware solutions that are "rolled" out to the clients entire network) and finally Business Transformation Partner (taking a proactive roll in changing their clients technology... so... I guess that is their sales force).

Active: They are present in around 130 countries but still half the workforce is based in Germany.

P/E: 19.5

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

The P/E of Wincor Nixdorf is too high for me with 19.5 and the P/B is far worse with 4.4 which gives a very clear no go form Graham. Their earnings to sales are lower than expected with only 4% but they have indeed a nice ROE of 22%! The book to debt ratio is also nothing to be proud of since it is as low as 0.4. In the last five years they have had a yearly growth rate of 1.8% which is... well.. inflation so pretty bad and this then gives us a motivated P/E of around 9 to 12 which means that Wincor Nixdorf is today overvalued on the market. They spend large sums on research since it corresponds to 113% of their earnings. Dividend is being paid out in the quantity of 2.9% so neither good nor bad and this represents 56% of their earnings so they can keep up with it but could be a problem with dropped earnings. The comment concerns that they are running a broken year that ends in September.

Conclusion: A nice ROE but that is more or less it! Some of the values are acceptable but most of them end up in the higher region which indeed means that neither I or Graham would go for this one today.

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