Analysis of Celesio

Company: Celesio

Business: A German wholesale and retail company that provides logistics and services to the pharmaceutical industry. They themselves own 2,200 pharmacies, have an additional 4,100 as participants in brand schemes and are in total providing 65,000 pharmacies and hospitals with medication each day.

Active: They are only active in Europe and are present in 14 countries mainly northern Europe.

P/E: -25.4 (P/E3: 122)

The P/E for Celesio is bad with -25.4 and if we look at the P/E3 it is as high as 122. The P/B is also far to high for me with 1.8 which gives according to Graham a very clear no go! Their earnings to sales were -1% and the ROE ends up, of course also, at -7.1%. The book to debt could also have been much better since it is as low as 0.4. In the last five years they have had a yearly growth of 0.4% which is extremely bad especially since they claim themselves that the expected growth for pharma and health care is 4.8% per year so why have they not managed to get that growth? The motived P/E becomes around 8 to 10 which means that the market is highly overvaluing the stock today and seem to have high hopes that they will manage to turn things around (for 2013 the first three quarters looks ok but not much more!). They pay a very low dividend of 1.3% which represented more then what they brought in and in the last five years four of them they have paid out more then what they earned. Crazy enough they even increased the dividend last year while having yet again a negative result! Oh, and the comment concerns that they have in the last five years made negative profit in three of those.

Conclusion: I see no reason to invest in Celesio today. They are far too highly valued based on absolutely nothing (well... I count hope as nothing)! If they decrease the dividend they would probably drop like a stone. In the last three months the share price has gone from around 16 € to the 23 € which is most likely due to the ok results they have shown but even with accounted for I see no reason for this high valuation and the dividend that they struggle to pay out is a silly!

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