Analysis of BASF 2014

Company: BASF

Business: A German chemistry and polymer company. They are active with five different business units: Chemicals (with intermediates and polymers), Performance Products (pigments, care chemicals, health chemicals and paper chemicals), Functional Materials & Solutions (catalysts, construction chemicals and coatings), Agricultural Solutions (crop protection) and finally Oil & Gas (exploration and extraction).

Active: World wide with both production (376 sites in total) and of course with sales to customers.

P/E: 15.8

Here you can find the previous analysis of BASF.

The P/E of BASF is too high for me with 15.8 and the P/B is equally too high with 2.8 which means that it is a no go for Graham. The earnings to sales are good with 7% and the ROE is still very good with 17.4% but it is less than what they had last year. The book to debt ratio is running at 0.8 which is ok. In the last six years they have had a yearly growth rate of 2.9% which is only so, so and it is down a lot compared to last year so 2013 revenue wise was not very good. this then gives us a motivated P/E of 12 to 14 which means that BASF is today a little bit overvalued on the market. They try to stay ahead of the game and therefore spend almost 38% of their earnings on research and this figure was pushed up since last year so that is good news. They pay a fully acceptable dividend of 3.3% which represents 51% of their earnings so they should bee able to keep it up.

Conclusion: BASF is a great company that one should become a shareholder of at good moments. Today is unfortunately not a good moment neither according to me or to Graham and therefore even though ROE and dividends are looking good we decide to stay away from BASF.

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