Wednesday, April 22, 2015

Analysis of Nestlé 2015

Nestlé, a Swiss consumer product giant

Company: Nestlé

ISIN CH0038863350 | WKN A0Q4DC

Business: A Swiss very large consumer products company. The main focus is within nutrition, pet care, health and wellness. To mentioned a few of their brands then: Gerber, Perrier, KitKat, Smarties, Nescafé, Maggi, Dog Chow, Purina and for the more complete list please look here.

Active: World wide

P/E: 16.5

Here you can find the previous analysis of Nestlé.
This company was analysed due to a request from Rafy - Long Investor over Twitter. 

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

The P/E of Nestlé is fair with 16.5 and the P/B is a bit too high with 3.4 which in total gives us a no go from Graham. The earnings to sales are at 16% which is good and the ROE is at 20.6% which is excellent! The book to debt ratio is at 1.1 which is also a good figure.
In the last five years they have had a yearly negative growth of -3.5% which is really bad and it gives us a motivated P/E of 8 to 10 which means that Nestlé is overvalued on the market today.
The spend a tiny amount of money on research which correspond to 11% of their earnings so here they should improve a little!
They pay an ok dividend of 3% which correspond to 50% of their earnings so hopefully they should be able to keep it up with remained earnings but please read my conclusion!

Conclusion: Graham says no and so do I. The earnings are seriously pimped with 8 billion CHF coming from what they call Associates. Reading the notes then one could see that 2.8 billion CHF was a revaluation of some shares for Galderma and 4.6 billion CHF were from selling L'Oréal shares back to L'Oréal. So "cleaning out" these one time things we get normalized earnings in the size of 7 billion for the full year 2014 which does not even cover their proposed dividend payment. So even though, due to the pimping, Nestlé looks ok with so, so P/E, P/B, great ROE and great dividend I will not go for this company!

If this analysis is outdated then you can request a new one.


Anonymous said...

Great Catch with the one time things on the income. Not that I ever go short, but it seems that one could go short in Nestle.


Fredrik von Oberhausen said...

Hi Kika,

Well... I also never go short but I have been wanting to do that with Beiersdorf for three years now.

If I would have then I would have been a very poor person today. :)