Wednesday 18 September 2013

Analysis of Doro

A Swedish niche telecom company for seniors

Company: Doro

Business: A Swedish telecom company focusing on a growing niche market. They have succeeded were Ericsson failed (their final gaming mobile phone consuls did not work out but it was a niche market attempt). Doros successful business is to produce mobile phones for seniors all over the world which we all know is a lucrative market due to several reasons: They have money, they are loyal and they are a rapidly growing market! 

Active: Doro is active on five continents and are making sales in 30 countries world wide.

P/E: 19.1

This company was analysed due to a request that were made in the comment field of the contrarian Lundbergs analysis and it can be found here. I have still not finished with the analysis of the sport shoe companies but I do not like to leave people hanging for too long so I will just bring this analysis in in between those.

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Doro is high with 19.1 but it can be ok for a serious growth company. What I do not like at all is the P/B that is running at 4.8. In total according to Graham it gives a very clear no go for investing in the company. The earnings to sales are running at 6% which is much better than Nokia and Blackberry since they had losses in 2012 but it is far from Apple with their 27%. The ROE is excellent with 25.3% and the book to debt is so, so with a ratio of 0.7. Their growth in the last five years have been spectacular with 18.2% and it is difficult to put a motivated P/E but it would be somewhere between 30 to 35 which would mean that the market is today undervaluing Doro. They pay a dividend of 2.4% which I find low and that represents 46% of their earnings which is acceptable and they should be able to keep it up and maybe even increase it in the future.
Conclusion: My contrarian rules tells me not to invest in Doro and I also therefore will not. If one looks upon it as a future growth company that will be able to continue to grow as they have done the last five years then it could be a good investment today. There are some question marks though...
Their production is fully outsourced to Asia (I do not like outsourcing). Why should Doro not end up in a situation similar to Apple vs. Samsung?
What will be Doros advantage when and if the giants steps into the market? Do they have specific patents that protects them against that?
My guess is that part of the markets undervaluation is based on that they see an uncertain future for Doro and so do I. If Doro would have been cheap I would not have had any fears but it is not cheap today.

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

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