Sunday 29 September 2013

Analysis of Beiersdorf



A German consumer goods producer


Company: Beiersdorf

Business: A German consumer goods company that are divided into two business segments: The Consumer Business Segment and Tesa Business Segment. In Consumer they are for instance making all the Nivea products that involves crèmes, shower gels etc. and in the Tesa (which is standing pretty much on their own homepage here) they are making the self-adhesives that many of us also know.

Active: They are present all over the world since they are marketing and selling their product lines in over 100 countries.

P/E: 37.6

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Beiersdorf is a whopping 37.6 and the P/B is also crazy with 5.1 so I don´t think I need to tell you what Grahams opinion would be... Their earnings to sales are a low 7% and the ROE is 13.5% which could be better. In the last five years they have managed to grow 0.2% per year so they have been beaten by inflation each year which gives a motivated P/E of 8 to 10 so the stock is highly overvalued. They spend 36% on R&D and by the look of it they should probably spend more because they are not doing well (this is actually wrong, because they do well, they just do not do as well as the markets hopes and wants them to do and pretty soon they should realise that) ... They pay a very low dividend of 1.1% which still represent 40% of their earnings. So they are not forced to lower it but my deposit account gives me a higher interest rate on cash then what Beiersdorf offers me! With the potential of a correction in the share price that is highly needed according to me.

Conclusion: Run away from this one! I only see a correction happening in the future and that means a significant drop in the share price. When a stock has that high P/E, P/B and are paying out such a small dividend it is a good moment to sell.
 
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