Tuesday 29 July 2014

Analysis of Fugro

Fugro, a Dutch geotechnology company

Company: Fugro

ISIN NL0000352565 | WKN A0ET3V

Business: A Dutch geotechnology company. They are divided into four subunits: Geotechnical (resolve geotechnical problems offshore, nearshore and onshore), Survey (all kind of offshore and geospatial surveys for the development of oil and gas platforms), Subsea Services (repair, construction etc.) and Geoscience (seismic and seabed databases for the exploration of new projects).

Active: They are active world wide in over 60 countries.

P/E: 5.6

Contrarian values of P/E, P/B, ROE as well as dividend of Fugro
The P/E of Fugro is excellent with 5.6 and the P/B is also pretty ok with 1.2 which gives a very clear buy from Graham. The earnings to sales are excellent with 18% and the ROE is spectacular with 21%! The book to debt ratio is also great with 1.3.
In the last five years they have had a yearly growth of 3.4% which is good and this then gives us a motivated P/E of 13 to 16 which means that Fugro is highly undervalued on the market today. However the earnings are doped from sales of discontinued operations which would otherwise leave us with a P/E around 11 and it would still be undervalued but less so then what it looks like from the start.
They pay a very nice dividend of 5.1% and this only represents 28% of their earnings so they should be able to keep it up. In the last five year the dividend has been 1.5 € in four of them and only in 2012 was it increased to 2 € before dropping down again to 1.5€ in 2013 again.

Conclusion: Graham says yes to this one and I must say that I find it very interesting. Much more so than for instance analysis of Guideline Geo that kept increasing their number of shares while Fugro is going the other direction and decreased their shares last year. Even the undoped P/E is excellent, the P/B is great, the ROE excellent and so is the dividend. Hmmm... Why should I not buy this one? Have I missed something?

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Unknown said...

You have found a great company according to your investment strategy, so i would like to know why not you should buy it? Are you only afraid that you have missed something that the market knows about?

I do understand you, when I find an company that looks good and cheap, then I think i have missed something, but I want to create more confidence, I have missed opportunities because of this, and will again, one thing I say to myself is that to be an investor you need to have confidence in your self, if not, you will sell when the stock drops 10 % instead of keep buying. I want to be a calm investor, but to be calm, i need knowledge :) I think the company looks great, but have not looked into it anything :)

Nice blog, and thanks!

Fredrik von Oberhausen said...

Hi Carl!

Thanks for your comment!

Hmmmm... I do not really care about the market and for a strange reason I look upon Fugro as a small company.... but 2.5 billion € in revenue and 275 million € in profit for the last five years is neither small or indicating a troubled company. So it is simply a problem with my thoughts.

I still find big companies that are being traded cheaply and currently I seem to prefer to buy them in comparison to a smaller one. My last investment was for instance IBM and I am still not happy with the size of that position.

On the other hand... the deeper and more unfriendly environments that the oil and gas industry are going to the more profit Fugro & Guidoline Geo will make with their products and services... I could imagine that the shale oil and gas will decrease their revenue growth to some extent but those kind of thoughts are pure speculation.

I will think about it a little longer and see what I will do. I need to make a major revision on the stocks of interest page so I will definitely bring Fugro in there.

Once again thanks for your comment and I hope your investments are going working out better than mine!

Unknown said...

Yes well, I think it will be hard to beat the index without this smaller "undervalued" companies, they have an higher potential growth. its easier for them to increase their revenue with 10 % than it is for GE.

Fredrik von Oberhausen said...

Well, Berkshire and many other investment and holding companies keep beating index without going for smaller companies so both options are possible.

What you say about potential revenue growth is definitely true and a small company growing big will enjoy several years of steady growth that one can enjoy to profit from as a shareholder.

Have you managed to look closer at Fugro to make up your own opinion about it?