Analysis of Adidas 2014

Company: Adidas

Business: A German sports brand company that are delivering state-of-the-art sports footwear, apparel and accessories. The most well known brands are: Adidas (sport), Reebok (sport), TaylorMade (golf) and Rockport (casual footwear).

Active: They are present in over 160 countries world wide with their 50,000 employees.

P/E:  20.6

Here you can find the previous analysis of Adidas.

The P/E of Adidas is too high for me with 20.6 and the P/B is also very high with 3.0 and this means that we receive a no go from Graham. The earnings to sales are at 5% which feels low but is an increase since last year and they have significantly improved their ROE to 14.3% from 10% which is good but 14% is still not an excellent ROE. The book to debt ratio is at 0.9 which is ok. In the last six years they have had a yearly growth of 5% which is great but it is on a down slope compared to 2013 and this then gives us a motivated P/E of 15 to 18 which means that Adidas is still overvalued on the market today. They pay a small dividend of 2% which represents 40% of their earnings so if things remain they should be able to continue at least to pay that.

Conclusion: Both Graham and I say no to this company. P/E and P/B is simply too high and the dividends too small. The growth has flattened out which might be temporary but who knows? I still think it is a good company to own but the share price simply is still too high for being of interest.

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