Wednesday 19 February 2014

Analysis of Groupe Casino

A French supermarket and retail chain

Company: Groupe Casino

Business: A French supermarket and retail group. They have several supermarket chains as well as several own brands. They have over 12,000 stores and around 300,000 employees.

Active: France (34% of profit), South America (53% of profit) and Asia (12%). It seems as if many French companies are "invading" South America and being good at it!

P/E: 8.2

Comment: When I lived in France the supermarket closest to me was a Casino. Since it was close by I very often went there and especially when I could not be bothered to take the car to go to the XXL Carrefour store.

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

The P/E for Groupe Casino is excellent with 8.2 and the P/B is ok with 1.2 which gives us a clear buy signal from Graham. The earnings to sales are so, so with only 3% but inline with many other supermarket chains. The ROE is fully acceptable with 14.2% but the book to debt is too low with a ratio of 0.3. In the last five years they have had an excellent growth rate of yearly 7.9%! Which gives us a motivated P/E of around 20 to 23 which means that the shares are highly undervalued today on the market. They pay a fully acceptable dividend of 3.9% which represents only 32% of the earnings so should be easy for them to keep it at least at that level.

Conclusion: Graham says that it is a very clear buy and also I am happy with this company. There is only one concern and that is the book to debt ratio that I do not like. Their massive and successful expansion in South America is however very interesting. This Groupe Casino will be added to my Stocks of Interest list with the next update.

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