Thursday 23 January 2014

Analysis of Symrise

A German fragrance and flavouring supplier

Company: Symrise

Business: A German supplier of fragrances, flavourings, active ingredients in cosmetics and raw materials as well as functional ingredients. They have two business divisions: Flavour and Nutrition (strong focus towards the food industry to add value to the products by creating new experiences for the customers) and Scent and Care (beauty care products that besides from fragrance also includes active substances)

Active: Globally active with strong focus in Europe. Currently active in 135 countries and they have 10% of the market.

P/E: 25.6

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

The P/E of Symrise is too high for me with 25.6 and what is even worse is the P/B that is running up at 4.6 which gives us a negative response according to Grahams formula. Their earnings to sales is pretty ok with 9% and the ROE is also great with almost 18%! The book to debt ration is acceptable with 0.7. In the last five years they have had a yearly growth of 5.6% which I find to be excellent! Which then gives us a motivated P/E of 16 to 20 which means that today Symrise is slightly overvalued by the market. They spend a nice amount of money on research maybe even a bit too much since it represents 72% of their earnings. They pay a small dividend of 1.9% which represents 49% of their earnings so at least they should be able to keep  paying out unless something goes very wrong.

Conclusion: Graham and I say no to this company today. They have some values that are really looking good and which makes it into a very interesting company but it is unfortunately traded at too high levels for me.

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