Saturday, May 17, 2014

Analysis of Bayer 2014


Bayer a German chemical and pharmaceuticals company


Company: Bayer

Business: A German chemical and pharmaceuticals company. They are divided into four business units: Bayer Healthcare, Bayer CropScience, Bayer MaterialScience and Service Areas (which include Bayer Business Services, Bayer Technology Services and Currenta).

Active: World wide with sales to customers and they define their presence in the world be telling how many people they employ in each continent.

P/E: 26.9


Here you can find the previous analysis of Bayer.

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

The P/E of Bayer is far, far too high with 26.9 and the P/B is also insane with 4.1 which gives a very clear no go from Graham. Their earnings to sales are however pretty ok with 8% and the ROE is also not too bad with 15.3% and it is an improvement compared to last year. The book to debt is at a ratio of 0.7 which is ok. In the last six years their growth has been 3.4% yearly which is good (but down compared to last year) and this then gives us a motivated P/E of 12 to 15 which means that Bayer is still highly overvalued by the market today. They spend a massive amount of money on research and it is 100% of their earnings which I find too much. They pay a tiny dividend of 2% which still represents almost 55% of their earnings so at least they should be able to keep it at that level.

Conclusion: Both Graham and I still say no to this company and what is interesting here is that the share price has since the last analysis increased by over 20% and still the P/E has decreased so Bayer really managed to increase their earnings which was needed but it is still an overvalued company in comparison to their growth rate. The only value of semi-interest is the ROE and the rest of them are completely un-interesting.

If this analysis is outdated then you can request a new one.

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