Tuesday, January 13, 2015

Analysis of Kone


Kone, a Finnish elevator and escalator company

Company: Kone

ISIN FI0009013403 | WKN A0ET4X

Business: A Finnish elevator and escalator company. They are standing on two pillar: New Equipment Business (sales of elevator, escalators and autowalks and control systems) and Services (design, construction, maintenance and modernization).

Active: Distribution in 60 countries world wide with 400,000 customers and over 950,000 units with service agreements.

P/E: 27.5

Comment: The Swedish investment company Industrivärden (analysis of Industrivärden 2014) used to own shares in Kone but now I no longer see them on the shareholder list.

This company was analysed due to a request posted on the Analysis Requests page.

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

The P/E of Kone is far, far too high for me with 27.5 and the P/B is equally insane with 11.4 which gives a very clear no go signal from Graham. The earnings to sales I find great with 10% and the ROE is excellent with 41%! The book to debt ratio is a bit on the low side with 0.5.
In the last five years they have had a spectacular yearly revenue growth rate of 7.8% which then gives us a motivated P/E of 19 to 24 which means that Kone is today overvalued on the market.
They pay a small but still acceptable dividend in the size of 2.7% which however represents 75% of their earnings so they better push up their earnings to be able to maintain that level of dividend payment in the future, at least their sales for the running 9 months of 2014 are up by around 5%.

Conclusion: Graham says no to Kone and so do I. The P/E and P/B are too high today and the dividend payment especially in comparison to their earnings are also too high. One must admit that the ROE is excellent though! My biggest concern is, if it is correct, that Industrivärden has walked away. When such a value investment company step out the door then the price of the company is very likely above ior close to the intrinsic value. I would not make an invest in Kone today.

To find out more about Kone then please visit my blog neighbour Spartacus, link to Kone material. It is in Swedish but Google translates it well enough. There were also readers complaining about the poor service that Kone gave.

If this analysis is outdated then you can request a new one.

4 comments:

Anonymous said...

Great company, but too expensive. At the moment...

Fredrik von Oberhausen said...

Yes, they are indeed too expensive at the moment but I am glad that they have entered into my growing lists of companies because who knows when that moment will arrive!

Anonymous said...

Thanks for the analysis, Mark.

Fredrik von Oberhausen said...

You are welcome Mark!