Tuesday 10 November 2015

Analysis of ABF 2015

Associated British Foods, an UK grocery, sugar and retail conglomerate

Company: ABF

ISIN GB0006731235 | WKN 920876 

Business: A British conglomerate with agriculture, agricultural products as well as retail. Currently they have five business segments: Sugar, Agriculture, Retail, Grocery and Ingredients. To find out more about their grocery brands then please click here.

Active: Europe, Africa, USA and Australia. Heaviest in the UK and Ireland.

P/E: 52.0 (yuk!)

Here you can find the previous analysis of ABF 2014

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

The P/E of ABF does not at all agree with me since it is up at 52.0! The P/B is however flying a bit closer to the clouds with 4.4. Still we get a massive no, no from Graham. The earnings to sales I find to be very low with only 4% and the ROE is horrible with only 8.4%. The book to debt ratio is however great with 1.7.
In the last five years they have managed to have a yearly revenue growth rate of 3.0% which is ok but not more and this then gives us a motivated P/E of 12 to 15 which means that ABF is highly overvalued on the market today.
They pay a silly dividend of 1% which, even though it is so low, still correspond to 52% of their earnings so they better improve those earnings!

Conclusion: Graham says no to ABF and so do I! The P/E and P/B are too high. The ROE is too low and the dividend is definitely too low for being of any interest! Since I am already a shareholder I should be asking myself... If I am not prepared to buy does that then not mean that I should sell it? To that I answer that it depends. In some situations I would agree but with ABF I do not. I do however not recommend anyone to step in as shareholder at this moment.

If this analysis is outdated then you can request a new one.

1 comment:

Fredrik von Oberhausen said...

Here is an interesting article from CNBC regarding Primark in Boston. They take a look at H&M, GAP and Forever21 and compare the prices with the prices of Primark in this Boston flagship store. I for one hope they are correct and the earnings must grow in ABF because the P/E is scary high right now.