Friday 6 May 2016

Analysis of ThyssenKrupp 2016

ThyssenKrupp, a German steel company

Company: ThyssenKrupp 

ISIN DE0007500001 | WKN 750000 

Business: A German steel and steel products company. They are still dividend into six business areas: Components Technology (assembled camshafts and ready-to-install net-machined crankshafts and engine components), Elevator Technology (passenger and freight elevators, escalators, moving walks, passenger boarding bridges as well as stair and platform lifts), Industrial Solutions (design and construction of chemical plants, refineries and other industrial facilities), Materials Services (carbon and stainless steel, tubes and pipes, nonferrous metals and plastics), Steel Europe (carbon steel flat products) and finally Steel America (production, processing and marketing of premium carbon steel products). 

Active: Almost in 80 countries world wide. 

P/E: 37.6

Here you can find the previous analysis of ThyssenKrupp 2015

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

The P/E of ThyssenKrupp is awful with 37.6 and the P/B is also not good with 3.7 which gives a very clear no go from Graham. Their earnings to sales is at silly 1% and the ROE comes in at less than 10% so also not good.
In the last five years they have had an extremely poor yearly revenue growth rate of -0.3% which then gives us a motivated P/E of 8 which means that ThyssenKrupp is today highly overvalued by the market.
They attempt to stay ahead and for this reason they spend 107% of their earnings on R&D. the problem here is not how much they spend on R&D but how poor their earnings are.
They pay a useless dividend in the size of 0.7% which still correspond to almost 30% of their earnings... useless.

Conclusion: Graham says no and so do I. The steel industry is a tough one since many years and ThyssenKrupp is not a healthy company. They they even decide to pay out dividends only shows how crazy management they have. The P/E, P/B and dividend are all sick values. I will stay far away from this one.

If this analysis is outdated then you can request a new one.


Anonymous said...

If you are interested in elevators. Have a look at Kone. Selling at a more attractive price at the moment.

Fredrik von Oberhausen said...

I cannot say that I have an interest for elevators. I am interested in companies that I can buy cheaper than what I consider them to be valued.

I looked at Kone a bit more than a year ago: analysis of Kone

Today according to Börsdata Kone they are trading at a P/E of 19.1, with a P/B of 10.4 with a dividend of 3.6% (70%! of their earnings AND it was a good year).

To me that is not a cheap company. It was not cheap in 2015 when I analysed it and it is not cheap today.

Anonymous said...

Kone will never be cheap as long as you don't have an ongoing 2008 crisis or internal problem. The valuation compared to 2015 is more sane. The EPS has grown into the valuation. Most Nordic industrial companies have a high dividend ratio. Kone never lowered their dividend during the recession. To me, Kone is sold to a fair price at 39. Average P/E, average yield. Not a bargain, nor over priced.

Anonymous said...

Never be cheap - I do not know. I hardly find data before the crisis so I really cannot say.
Valuation - I fully agree.
EPS - It is going in the correct direction.
Dividend ratio - True. Often because their EPS have not grown as it should have and many of them are overvalued.
If one compares to their yearly growth rate then I would agree that the price is indeed fairer today.

I find it difficult to buy a very unsexy, small, company at a P/E around 20. Already today I find their debt high and by the look of it they keep buying companies to keep growing their earnings + revenue. A credit downgrade and the share price would fall significantly is my fear.

Nah, I would never be able to motivate Kone at p/e 20 when i can buy an american power house for half that p/e with simlar dividend but much lower pay out ratio.

Why should I pick Kone? Due to macromeconomics? The world need elevators and escalators? Still keeping one of those american power houses in mind...

-Fredrik vonOberhausen

Anonymous said...

Kone small? Kone has a market valuation, half of Hennes & Mauritz and larger than SKF. Everything is relative and especially to the American market, but if you call it a small company in the Nordic market I wonder what planet you live on ;)

Whether you motivate a P/E of 20 or not is irrelevant ;) What matters is what the market value the company to. I've seen some bloggers around saying: Hennes & Mauritz is expensive and won't buy it until they see a price of under 200. But what they never have looked into is whether H&M ever has been valued to a P/E of 15 or not during the last 10 years? The answer is that is hasn't and not even at the deepest recession som years ago did H&M sell for P/E 15. Some companies are expensive because the market has put a high price tag on them. Not necessarily because they will grow 20% per year. It seems it is the same for Kone and historically it has been difficult to buy at low multiples. I ask myself. Why is it like this? Does Kone have better qualities than other Finish companies? Looking at the numbers is seems as the market says yes.

Not saying Kone will be a fantastic investment if one buys now. But find your reasoning questionable.

All the best

Anonymous said...

I did not call it small compared to Nordic market I called it small compared to american giants. Why should one even sit and decide to buy Nordic companies and compare that market internally when the companies are internationally active and what is important is not some other elevator producer on the Nordic market or even worse another company in the industrial sector... But the elevator company in China... Or in the USA or wherever.... THOSE are important for the long run.

Well... Bloggers put up wish prices and h&m under 200 is maybe one of those... But most of them still own h&m so their wishes did not come true but they were sensible enough to make the buy when it was cheap enough which still says a lot.

I will always go back to how many years do I have to wait to get my money back. P/e 20 and i have to wait 20 years, p/e 10 and i must wait for 10 years. sure a p/e 20 growing 20% per year versus a p/e 10 growing only 5% and the calculation changes dramatically but still to me those things must be calculated.

Additionally there are so many investment strategies. There are few right or wrong. People that worry much should buy solid, excellent companies at fair prices... Or even better buy index funds and people that have no concerns should go full out on net-nets.

My strategy is to buy cheap companies... Is my strategy working. No, not yet... Who knows... Maybe never but I sleep good.

-Fredrik von Oberhausen

Anonymous said...

"I did not call it small compared to Nordic market I called it small compared to american giants"
Go back and see what you wrote. Nothing stated that you compared to the US market.

"Well... Bloggers put up wish prices and h&m under 200 is maybe one of those... But most of them still own h&m so their wishes did not come true but they were sensible enough to make the buy when it was cheap enough which still says a lot."
Isn't that what I tried to say with the example of Kone?

I presume you speak Swedish.
Excellent post about pricing.