Wednesday 27 April 2016

Analysis of Fresenius 2016

Fresenius, a German health care investment company

Company: Fresenius 

ISIN DE0005785604 | WKN 578560 

Business: A German health care holding and investment company: They own fully or parts of: Fresenius Medical Care (own 31%) that work with dialysis, Fresenius Kabi (own 100%) treatment of chronically ill patients, Fresenius Helios (own 100%) having 111 hospitals and clinics (in Germany mainly) for acute treatment of patients and finally Fresenius Vamed (own 77%) helps with projects and management business of health care facilities.

Active: World wide via their holding companies. FMC in 40 countries, Kabi in around 60 countries, and Vamed over 70 countries.

P/E: 26.3

Here you can find the previous analysis of Fresenius 2015

The P/E of Fresenius is strained with its high 26.3 and the P/B is also a little high with 3.3 which gives a no go from Graham. The earnings to sales is down at 5% which I find low and the ROE is at 12.4% which is ok but also not more. The book to debt ratio I find a bit low with 0.5.
In the last five years they have had an exceptional yearly revenue growth rate of 10.8% which then gives us a motivated P/E of 26 to 30 which would, due to their strong growth rate, mean that they are today slightly undervalued by the market.
They spend an acceptable amount of money on R&D since it correspond to almost 35% of their earnings.
They still pay out a silly dividend of 0.8% which correspond to 22% of their earnings so at least they should be able to keep it up.

Conclusion: Graham says no to Fresenius and so do I even though they appear to be undervalued. For me the P/E and P/B are too high and the ROE and dividend are too low for being of any interest. I must admit that I do love their growth rate but for an investment and holding company, no matter which hyped business they invest in... I am not prepared to pay P/E 26 and I always have and probably always will wonder why Fresenius is traded at those high P/E levels.

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1 comment:

Fredrik von Oberhausen said...

Just like last year I have been forced to kick up the publication speed to even manage to keep up with the amount of data arriving now during spring. More or less at the same time there are dividends being paid out, annual reports arriving, Q1 reports arriving and I need to push out the analysis of the companies on DAX.

Please, make sure to only read what makes sense to you.