Company: Eniro
ISIN SE0000718017 | WKN 579941
Business: A Swedish search and advertisement company. They have two business units: Local search (with desktop search, mobile search, campaign products and print which was the starting business of Eniro) and the second one is Voice (which gives assistance services via telephone and SMS).
Active: Sweden, Norway, Denmark, Finland and Poland
P/E: 5.9
The P/E of Eniro is excellent with 5.9 and the P/B is also great with 0.3 which gives us a very clear buy from Graham. The earnings to sales are fully ok with 6% but they ROE is not so good with only 5.9%. The book to debt ratio is ok with 0.9.
In the last five years they have had negative yearly growth in the size of -11.2%! This then gives us a motivated P/E of around 8 to 10 which means Eniro is currently undervalued on the market.
They pay no dividends which I do not like.
Conclusion: Graham says yes to Eniro and for me it is a contrarian company with low P/E and low P/B, the kind that I like to invest in but usually seem to invest too early into. The question is as always: Will the company turn around? And if yes... How long will it take?
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2 comments:
It's noteworthy that this company doesn't have a lot of moat. It can be wiped out by Google any time -- or a newcomer that better understand how to make people love a web site.
I guess the name is pretty well established and that might help bringing people to the site, but in my opinion that's a rather shaky foundation.
It is true that every company working almost purely on internet and with advertisement can loose their market share very quickly.
To me the biggest danger comes when an industry takes a new direction which internet have created in many industries.
Example newspapers. How many did not close down when people started reading online? Several and the ones that managed to convert will probably survive for a long time.
The online advertisement market is huge and many companies can and are getting a slice of that cake. Even though theoretically monopoly is great in reality it is not and most companies know that it is good for them to have competitors to stay sharp, to keep develop, to have enthusiastic employees etc.
Back to Eniro, I do not know if their moat is large enough but i do think they have managed to survive the transition which speaks in favour for them in the future. Then again my guess is as good as anyone elses.
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