Tuesday 19 May 2015

Analysis of Lanxess 2015

Lanxess, a German specialty chemicals company

Company: Lanxess

ISIN DE0005470405 | WKN 547040

Business: A German specialty chemicals company. They are divided into three segments: Performance Polymers (synthetic rubber and plastic manufacturing), Advanced Intermediates (basic and fine chemicals) and finally Performance Chemicals (organic plastic colourants).

Active: They are now only present in 29 countries world wide so apparently two countries were not very profitable.

P/E: 100.0

Here you can find the previous analysis of Lanxess 2014.

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

The P/E is far, far, far too high with 100.0 but the P/B is ok with 2.2. Still it gives a very clear no go from Graham. The earnings to sales are awful with 2% and the ROE is also bad with 2.2%. The book to debt ratio could also be better since it is down at 0.4.
In the last five years they have had an ok yearly growth rate of 2.4% which gives us a motivated P/E of 9 to 13 which means that Lanxess is overvalued on the market today.
They spend plenty of money on research even though they cut it compared to last year since this year it still correspond to 340% of their earnings.
They pay a tiny dividend of 1% which still correspond to 97% of their earnings so they better start improving their earnings and I find it silly to increase the amount of shares and at the same time pay out a dividend.

Conclusion: Graham and I both say no to Lanxess. I still do not see that they have managed to turn it around and even if they manage to do that soon I still find them to be overvalued. The P/E is too high, the ROE is too bad and the dividend is too low. They are, by the look of it, doing a lot to improve their situation with even stepping out of market/countries so hopefully they will manage to improve their poor earnings situation. I will in the meantime not step into Lanxess. Oh, and they might even get kicked out of DAX (or K+S) by a real estate company.

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