Wednesday 3 July 2013

Analysis of Grammer

A German interior parts producer for automotive

Company: Grammer

Business: A German automotive company that are producing interior parts. They have two main businesses: Automotive with head supports, armrests and centre console. The second one is Seating systems with the division off-road, truck/bus & railway.

Active: They have a strong presence in Europe where we have a fairly strong automotive industry. Besides from Europe they are also in the USA, Brazil, Argentina, Mexico, China and Japan. In total they are in 18 countries world wide and have 30 production sites.

P/E: 11.0

The P/E is looking very good with 11 and the price to book is also very nice with 1.2 which gives a clear buy according to Graham. The earnings to sales is not very impressive since it is only 2% and the book to debt is ok but not more. The growth for the last five years has been yearly 2.5% which is pretty much inflation. Strongly influenced by 2008 being a good year. The motivated P/E ends up being fairly much what the company is being valued at according to the market today. They only pay out 2.2% dividends and they have only paid out twice in the last five years. However the dividends only represents 24% of the earnings so there is a lot of room to increase the payments.

Conclusion: I´m very uncertain about Grammer. On one hand they should be a cyclical company and on the other hand with their trucks, boats, buses and railway they might have found a way to balance it out a little. Even though they are not very cyclical they are being treated on the stock market as if they are and here in Germany I am kind of waiting for the air to go out of the automotive industry (trust me I do not look forward to it!) so I would not buy Grammer today but I think it is worth to grab the company when the automotive industry crashes and Grammer is being dragged down with them.

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