Wednesday 16 October 2013

Analysis of Infineon

A German semiconductor company

Company: Infineon

Business: A German semiconductor company that are currently trying to push their focus areas as being: Energy Efficiency, Mobility and Security. I prefer the older approach of: Automotive for which they produce chips, Industrial Power Control in which they are making components for industrial applications, Power Management and Multimarket which is power components for high frequency applications and finally Chip Card & Security for instance are they making the security systems in the passports.

Active: Mainly in Europe and very heavily in Germany due to their products and the car industry here. They have some expansion into the US and Asia.

P/E: 18.5

Comment: I found their homepage to be awful! It looks like a over crowded technology page for serious computer nerds. They should spend some money on making their homepage easier and more visitor friendly.

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of Infineon is high with 18.5 and the P/B is also far above acceptable levels with 2.2 this of course then also leads to that the company is currently not interesting for making an investment. the earnings to sales are very good with 11% and the ROE is so, so with 12%. The book to debt is excellent with a ratio of 1.5. In the least five years they have had a bad time and a negative yearly growth of -2%. the motivated P/E therefore ends up around 8 to 10 which means that the company is currently overvalued on the market. They are spending a big chunk of money on research since that represents almost 107% of their earnings so they seem to be behind their competitors one way or the other. They pay a tiny dividend of 1.6% which represents 30% of their earnings so they should be able to stick to that and even increase it if nothing dramatic happens.

Conclusion: I see no reason to step into Infineon today since the company is highly overvalued based on their current earnings. Not only that but also the P/B is high and the dividend is much lower then what I like to invest in when I get the choice from the start.

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Fred Xue - Telling Stories for Marketing said...

Infinion, or Infineon?:-)

Fredrik von Oberhausen said...

Thank you Fred!

I must have dropped my brain as well as my eye sight because I did not even take the wake up call which should have come from the different name in the logo. :)

So thanks once again and the correction has been made.