Thursday, March 12, 2015

Analysis of BASF 2015


BASF, a German chemistry company

Company: BASF

ISIN DE000BASF111 | WKN BASF11

Business: A German chemistry and polymer company. They are active with five different business units: Chemicals (with intermediates and polymers), Performance Products (pigments, care chemicals, health chemicals and paper chemicals), Functional Materials & Solutions (catalysts, construction chemicals and coatings), Agricultural Solutions (crop protection) and finally Oil & Gas (exploration and extraction). 

Active: World wide and as they say themselves "in almost every country in the world".

P/E: 15.6

Here you can find the previous analysis of BASF 2014

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

The P/E is little bit too high with 15.6 and the P/B is also a little too high with 2.9 which overall gives a clear no go from Grahams formula. the earnings to sales are like last year 7% which is ok but they have managed to improve the ROE to 18.3% which is a great value! The book to debt ratio is ok with 0.7.
In the last five years they have had a yearly revenue growth of 3.1% which is excellent (in reality the biggest revenue jump were four years ago and since then a bit up and down) and this then gives us a motivated P/E of 12 to 15 which means that BASF is today fairly valued by the market.
The spend around 37% of their earnings on research and this I find to be a very reasonable figure.
They pay a dividend of 3.2% which is fully ok and this corresponds to 50% of their earnings which is also ok but they should really start to push up the earnings to keep that up. This can of course also be done by share buy back programs which I think would be good for BASF.

Conclusion: Graham does indeed say no to this company and I am between a rock and a hard place! One could claim that BASF is still fairly valued and one can get a great company at a fair price and since I am already a shareholder I should of course recommend everyone to buy BASF... but no, at this share price I will personally not by any more shares. I want them to either drop down again or that their earnings and revenue increase so much that they become cheap again before I would advice to buy into BASF. The P/E is ok, the P/B is ok, the dividend is ok and well... the ROE is great but that is simply not enough for me right now.

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