Friday, 1 May 2020

Analysis of K+S 2020

Logo of K+S 2018

Company: K+S 


Business: A German commodities company that are mining and processing raw materials. The group is divided into four segments: Agricultural, Industry, Consumer and Communities.

Active: On 90 locations in 5 continents.

P/E: 13.2

For the previous please click on Analysis of K+S 2020.

The P/E of K+S is high with a figure 13.3 but the P/B is excellent with 0.3, which then gives a buy from Graham. The earnings to sales are very low with only 2% and the ROE is appalling with 2.0%. The book to debt ratio is so, so with 0.7.

In the last five years they have had a yearly negative revenue growth rate of -0.5% which is undesired and this gives us a motivated P/E of around 6 to 8 which means that K+S is over valued by the market today. They are keeping their spending in R&D but based on the low earnings it is now at 18% which is on the high end based on the type of the company.

They pay a silly dividends of 2.4% which only corresponds to 32% of their earnings so they could push that up higher.

Future: The products they sell has a long term connection with mankind. We will need to salt our roads, we will continue to eat food and drink water. However does this tiny German player have an existential right? The share price movement from the heydays around 2011 and during the takeover attempt in 2015 would indicate that this is not the case. The expansion in Canada does not seem to have truly paid off but it did build up their debt which they now want to reduce by selling parts of the business.

Conclusion: The Q&D of Graham would make him interested in buying the shares but I am not. I will remeain a grumpy shareholder still regretting that I did not sell during the takeover attempt in 2015.

No comments: