Analysis of Heidelberg Cement

Company: Heidelberg Cement

Business: A German building / construction material company. They have two groups cement (which is the centre and core of their business) and aggregates which includes gravel, crushed rock and sand. Until the 1960´s they were only present in the south of Germany but since then they have grown by taking over competitors in different regions of the world.

Active: Currently present in 40 countries often also with production sites all over the world.

P/E: 36.3

The P/E for Heidelberg Cement is awful with 36.3 but the P/B is fully acceptable with 0.8 which in the end gives a very clear indication from Graham that this company is not of interest. Their earnings to sales are at 2% which is low but fits to big quantity low margin that I would expect for them so I guess it is ok. They have a ROE of 2.4% which is really bad. The book to debt is also pretty ok with 0.9. In the last five years they have had -0.3% yearly growth so not good at all and I would place them on a motivated P/E of around 8 to 10 so the market are today highly overvaluing the shares. They pay a dividend that is almost no existing with 0.9% which still represents almost 30% of their earnings which once again indicates that this stock is highly overvalued by the market.

Conclusion: I see no reason to buy this company today. It is a fine German DAX company so I might end up owning shares in it one day but not today. Far, far too expensive for being of any interest and if I would have own shares there I would definitely look into selling them to buy something that would offer better dividends and growth potential.

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