Business: A Russian pharmaceutical company. They are producing and selling around 250 different pharmaceutical products. They have eight production lines of which six are already complying to the EU GMP regulations and the remaining two will be converted before the end of 2014. They already have a foot in Cyprus (EU) which means they have the possibility to step into Europe.
Active: They are currently focused on Russia, Ukraine and have, as mentioned, one foot in Cyprus.
Comment: Today they actually arrive with the report for 2013 so if you find this analysis of interest then you should go to the homepage and check out how they did in 2013 before even starting to consider an investment.
The P/E of Pharmstandard is excellent with 4.7 and the P/B is so, so with 1.2 which gives us in the end a clear go signal from Graham. The earnings to sales are also great with 19% and the ROE is very good indeed with 26%! With a book to debt ratio of 2.7 they have built up plenty of buffer for surviving a couple of tough years (but I would have preferred them to start paying dividends!). They have in the last five years had a yearly growth of 29%! That is amazing! This then gives us a motivated P/E of (I am cautious again) 30 to 50 which means they are strongly undervalued by the market today. They pay no dividends which I really do not like!
Conclusion: Graham says yes and I must say that I get very tempted by Pharmstandard. The P/E, P/B and ROE are all excellent and that growth they have shown in the last couple of years is just spectacular! I could consider stepping in as a shareholder in Pharmstandard but would then look a bit more deeply into their potential of actually being able to enter the European market. Because if I would think that they would fail that then the company would be less interesting to me especially without the dividend payments.
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