Thursday, April 28, 2016

Analysis of Heidelberg Cement 2016


Heidelberg Cement, a German construction supplier


ISIN DE0008469008 | WKN 846900 

Business: A German manufacturer of building materials. They are the global market leader in aggregates and a prominent player in the fields of cement, concrete and other downstream activities such as ready-mixed concrete, concrete products and concrete elements.

Active: 40 countries and at 2,380 locations. 

P/E: 18.6 


Here you can find the previous analysis of Heidelberg Cement 2015

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

The P/E of Heidelberg Cement is high with 18.6 but the P/B is excellent with only 1.0 and this then gives a buy signal from Graham. Their earnings to sales are pretty ok with 6% but the ROE is horrible with only 5.4%. The book to debt ratio is excellent with 1.2 and it looks as if they stand ready to make acquisitions once the politicians takes their responsibility and push up infrastructure as they should have done a long time ago in the countries with little debt and not too outrageous governmental useless spending.
In the last five years they have had a silly yearly revenue growth rate of 0.9% which then gives us a motivated P/E of 9 to 12 which means that Heidelberg Cement is today overvalued by the market.
Additionally they pay a silly dividend in the size of 1.6% which correspond to 30% of their earnings so hopefully they can keep it up but they tend to change the pay out ratio based on the earnings.

Conclusion: Graham says yes to Heidelberg Cement and I say no. The P/E is too high for me and the ROE and dividend are too low. With politicians starting to take their responsibility then Heidelberg Cement will be one of the companies profiting but today I see few politicians that have the ability to act countercyclical as they should do for the stability of the nation that they serve. Only country I see doing that is Norway. These days they build out their oil and gas fields cheap and they push up their infrastructure cheap. This type of thinking and acting is what will keep Norway as a powerful nation in the future.

If this analysis is outdated then you can request a new one.

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