Friday, April 29, 2016

Analysis of Henkel 2016


Henkel, a German consumer products company

Company: Henkel 

ISIN DE0006048432 | WKN 604843 

Business: A German consumer products company that are divided into three business units: Laundry & Home Care (28% of revenue, product examples: Persil, Purex and Pril) , Beauty Care (21% of revenue, product examples: Schwarzkopf, Dial and Syoss) and finally Adhesive Technologies (50% of revenue, product examples: Loctite, Teroson and Technomelt).

Active: Apparently it is more important from how many countries their employees come from than how many countries they themselves are present in. Their employees come from 120 countries world wide... last year the company was present in 75 countries. Take your pick of what you find the most useful information.

P/E: 23.2


Here you can find the previous analysis of Henkel 2015

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

The P/E is very high with 23.2 and the P/B is equally attractive with 3.2 which gives a no go from Graham. The earnings to sales are excellent with 11% and the ROE is ok with almost 14%. The book to debt ratio is excellent with 1.6.
In the last five years they have had a very good yearly revenue growth rate of 3% which then gives us a motivated P/E of 12 to 15 and Henkel is therefore overvalued by the market today.
The spend almost 25% of their earnings on R&D and this I find to be a very healthy number.
They pay a silly, silly dividend in the size of 1.4% which correspond to 34% of their earnings so hopefully they will be able to keep that up also in the future with nice yearly dividend increases.

Conclusion: Graham says no to Henkel and so do I. The P/E is simply too high and the dividend is too low. The earnings to sales look very tempting and the ROE is also fully ok but it is not enough to convince me. I would love to own Henkel one day but it is still too expensive for me.

If this analysis is outdated then you can request a new one.

2 comments:

raheel said...

Hi,
I am not familiar with any of the Henkels's products, so my question might seem very naive: Whats the moat of Henkel, in terms of qualitative analysis? Something similar to P&G?
Thanks,
raheel

Anonymous said...

Henkel have some very well known consumer products in categories similar to P&G. Moat.... Yeah... With the trend of more and more retail chains producing and selling their own brands I really can not say what will happen to their moat there and that of course equally goes to P&G that have shown no growth in the last couple of years.

With the adhesive they are standing very strong. In many countries their brand name is being used instead of people asking for adhesive so that is a pretty strong moat.

Henkel additionally have zero own production sites. Everything is outsourced which gives them flexibility.

Many of us financial bloggers are not consuming as the majority of the population. I always make a price/quality evaluation and I never end up with the expensive brand products which makes it hard for me to understand why someone goes out and buy those products yet people do so there must be something to it.

Fredrik von Oberhausen