Analysis of Adidas 2015

Company: Adidas

ISIN DE000A1EWWW0 | WKN A1EWWW

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). In 2014 due to that Germany became world champions in football they are profiting from sales of everything around that. They are also on their way to sell Rockport.

Active: In 160 countries world wide with their over 53,000 employees.

P/E: 29.6

Here you can find the previous analysis of Adidas 2014.

The P/E is awful high for Adidas with 29.6 and the P/B is also a bit high with 2.6 which gives a very clear no go from Graham. Earnings to sales are very poor with only 3% and the ROE is also very low with only 8.7%. The book to debt ratio is however acceptable with 0.8.
In the last five years they have had a yearly revenue growth of 3.9% which is ok but also not more and this then gives us a motivated P/E of 14 to 17 which means that Adidas is today highly overvalued on the market.
They pay a tiny dividend in the size of 2.1% which represents as much as 62% of their earnings so they must improve they earnings to keep up the dividend payments.

Conclusion: Graham is saying no to Adidas and today I agree with him. the P/E and P/B is too high and the ROE as well as the dividend payments are far too low for being of any interest to make an investment. Since I am already a shareholder I will remain as such but I see no reason to increase my holding based on these data.

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