Tuesday, June 10, 2014

Analysis of Infineon 2014


Infineon a German semiconductor producer


Company: Infineon

Business: A German semiconductor company. They have three focus areas: Energy Efficiency, Mobility and Security but the four business areas are: Automotive (chips manufacturing), Industrial Power Control (components for industrial applications), Power Management & Multimarket (power components for high frequency applications and smart grids) and finally Chip Card & Security (security systems for passports).

Active: Mainly in Europe. Some expansion into Asia and the US.

P/E: 37.9


Here you can find the previous analysis of Infineon.

Contrarian values of P/E, P/B, ROE as well as dividend for Infineon

The P/E is an outrage with 37.9 and the P/B is a bit too high with 2.9 which gives a clear no response based on Grahams formula. The earnings to sales are ok with 7% but the ROE is down at 7.6% which is bad. The book to debt ratio is great with 1.5. in the last six years they have managed to gave a negative yearly growth of -1.9% which is really bad and we then receive a motivated P/E of around 8 which means that Infineon is highly overvalued by the market today. They have spent massive amount on research lately and last year it was at 193% of their earnings however they have now finished the development of the 300 millimetre technology and they even state that they will decrease their research expenses in the future and increase the dividend. Last year they paid a tiny dividend of 1.3% which still then represented 50% of their earnings so they better start pushing up their earnings!

Conclusion: Bad P/E, bad P/B, bad ROE and add to that a tiny dividend so without a doubt both Graham and I say no to this one. Still... I am sure that the share price will increase and by the look of it Infineon is doing good business again but I doubt that they will drop in with earnings that are in the region of one billion € which they will need to even be somewhat close to fulfilling my criteria. So no, no, no on Infineon.

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