Wednesday, March 16, 2016

Analysis of Adidas 2016


Adidas, a German sports brand company

Company: Adidas 

ISIN DE000A1EWWW0 | WKN A1EWWW 

Business: A German sports brand company that are delivering state-of-the-art sports footwear, apparel and accessories. The most well known brands are: Adidas (sport), Reebok (sport) and TaylorMade (golf).

Active: In 160 countries world wide with their over 53,700 employees. 

P/E: 31.0 


Here you can find the previous analysis of Adidas 2015

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

The P/E of Adidas is too high for me with 31 and the P/B is also a bit high with 3.5 which gives a clear no go signal from Graham. The earnings to sales I find low with only 4% and the ROE is also not something to get overexcited about since it is only 11%. The book to debt ratio is ok with 0.7.
In the last five years they have had a very nice yearly revenue growth rate of 4.9% which then gives us a motivated P/E of 15 to 18 which means that Adidas is today overvalued by the market.
They pay a silly dividend of 1.6% which still correspond to 50% of their earnings so there might not be a risk for a dividend cut but they better start pushing up their earnings!

Conclusion: Graham as well as I say no to Adidas today. The P/E and P/B are too high, the ROE and dividend payments are too low for being of any interest to invest in it. Since I am already a shareholder I will not increase my position in Adidas but I also see no reason to sell it. The company is, compared to its peers, fairly valued at this moment and I would demand extreme over valuation to make me sell it.

If this analysis is outdated then you can request a new one.

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