Friday, May 15, 2015

Analysis of Heidelberg Cement 2015


Heidelberg Cement, a German building company


ISIN DE0008469008 | WKN 846900 

Business: A German manufacturer of building materials. They are the global market leader in aggregates and a prominent player in the fields of cement, concrete and other downstream activities such as ready-mixed concrete, concrete products and concrete elements. So little has changed since last year. Noteworthy though that they have been 125 years on the stock exchange.

Active: Still active in 40 countries but say now in 2,300 locations.

P/E: 28.6

Here you can find the previous analysis of Heidelberg Cement 2014

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

The P/E of Heidelberg Cement is scary high with 28.6 but the P/B is excellent with 1.1. Still they fall outside of the Graham comfort zone. Earnings to sales are at an ok 4% but the ROE is horrible with only 3.7%. The book to debt ratio is great with 1.0.
In the last five year they have not had an impressive growth rate since it has yearly been only 1.4% which gives us a motivated P/E of 9 to 12 which means that Heidelberg Cement is today highly overvalued on the market.
They pay a silly dividend of 1% which corresponds to around 30% of their earnings so they should at least be able to keep that.

Conclusion: Both Graham and I say no to Heidelberg Cement. The P/E is too high, the ROE is too low and so is the dividend payment. The only good value is the P/B but that is not enough for me to consider an investment in a company. To me it seems as if investors expectation on government push of infrastructure á la Keynes is the reason for this valuation.

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