Saturday, March 12, 2016

Analysis of BASF 2016


BASF, a German chemical company

Company: BASF

ISIN DE000BASF111 | WKN BASF11

Business: A German chemistry and polymer company. They are still active with five different business units and those are: Chemicals (with intermediates and polymers), Performance Products (pigments, care chemicals, health chemicals and paper chemicals), Functional Materials & Solutions (catalysts, construction chemicals and coatings), Agricultural Solutions (crop protection) and finally Oil & Gas (exploration and extraction).

Active: World wide and as they say themselves "in almost every country in the world". 

P/E: 11.4


Here you can find the previous analysis of BASF 2015

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

The P/E for BASF is good with 14.7 and the P/B is excellent with 1.9 which still gives a no go from Graham. The earnings to sales have dropped down to 6% which they need to work on and the ROE is so, so with 12.6%. The book to debt ratio is ok with 0.8.
in the last five years they have had an awful yearly revenue growth rate of -0.8% of which the entire drop came last year. This then gives us a motivated P/E of 8 to 10 which means that BASF is slightly overvalued on the market today.
To stay on top of the game they are spending 49% of their earnings on R&D which I find to be fairly high but I also know that they need to spend that much.
They pay an excellent dividend of 4.5% which correspond to 67% of their earnings which is far too high. They must start to push up their earnings to keep being able to pay a reasonable dividend also in the future.

Conclusion: Graham says no to BASF but I say yes. The P/E and P/B is excellent, the ROE is ok and the dividend is excellent. BASF is a typical buy and hold company. Right now is a good moment to buy it. Can it drop down even further in share price? Of course it can! But the price right now, for BASF, is fully acceptable which means one can buy a great company at a fair price. I will of course remain as a shareholder and will need to think about if I increase my holding even further.

If this analysis is outdated then you can request a new one.

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