Monday 7 April 2014

Analysis of Austevoll Seafood

A Norwegian fishing company

Company: Austevoll Seafood

Business: A Norwegian fishing and fish farming company. They have five segments to lean back on and those are: Fishmeal & Oil (grinding down all the leftovers and extracting the fish oil. Often use as animal feed etc.), Human Consumption (fresh fish as well as canned fish), Pelagic (frozen fish), Production - Salmon & Trout (these are the fish farms they have a total of 137 of them) and finally Sales & Distribution (we all know what that means)

Active: With fishing and farms they are active in North Atlantic, Peru and Chile. They are making sales to 29 countries world wide.

P/E: 17.1

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

The P/E of Austevoll Seafood is too high for my liking with 17.1 but the P/B is great with 0.8 and in total it gives a very clear buy according to Graham. The earnings to sales is running at 4% which I find not so good based on that similar to an oil company they just grab their product from the ocean. What is however worse is that they ROE is only at 4.5% and that I do not like. The book to debt is good with a ratio of 1. In the last five years (2008-2012) they have had a yearly growth of 23.7% which is spectacular! However... they big jump appeared in 2009 and since then not much has actually happened in terms of revenue increases actually even the opposite in 2012. Either way that gives us a "motivated" P/E of 33 to 55 (I keep it broad this time!) which means that the stock is undervalued on the market today. They pay a dividend of 2.8% which is ok but that is also all and that represents 48% of their earnings so they should really push up their earnings higher to be able to improve the dividend payments.

Conclusion: Graham says yes and I do not like it. In my opinion the P/E is too high for a non real yearly increasing growth company. I must admit that they are good inline with pushing their fish farms which will become more and more important with decreased fishing quotas but still... I find the P/E too high and the ROE is also not acceptable. The P/B is great and the dividend acceptable but that just is not enough for me any longer.

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