Company: K+S
ISIN DE000KSAG888 | WKN KSAG88
Business: A German commodities company that are mining and processing raw materials. The group is divided into the two segments Potash & Magnesium (that is being used as standard and speciality fertilizers for enhancing the agricultural harvests) and Salt (de-icing, purified salt that are used for instance as table salt etc.).
Active: Main focus in Europe and the US. Growing activity in Canada due to the Legacy project. Minor presence in South America and Asia.
P/E: 16.8
Here you can find the previous analysis of K+S 2014.
The P/E for K+S starts to be far too high with 16.8 but the P/B is still acceptable with 1.6. Either way K+S now falls outside of the Grahams formula so from him it is a no go. The earnings to sales are looking good with 10% but the ROE is not so exciting with 9.2%. The book to debt value has been significantly improved and is now at 1.0 which is good.
In the last five years they have had a poor yearly revenue growth since it is at -5.2%, so seriously bad, which then also gives us a motivated P/E of around 8 to 10 which means that K+S is today highly overvalued on the market.
They spend a silly amount on research since it is only 3.3% of their earnings and I would like to see more.
They pay a dividend in the size of 2.8 which is ok but not more and this represents 47% of their earnings so it is ok and they should hopefully be able to keep it up.
Conclusion: Graham says no to K+S and so do I. The P/E is high and the ROE is too low and the dividend is only acceptable so I see no interest in stepping into K+S today. Since I am already I shareholder... I still do not see a reason to sell my shares but I will definitely also not increase my holding any further.
If this analysis is outdated then you can request a new one.
Potash, the Canadian mining company arrived last Friday 26/6-2015 with an friendly offer to the management of K+S. The offer has not yet been disclosed but the market seems to expect it to be around 40+ euro.
ReplyDeleteI will try to make an analysis of Potash as soon as possible. Looking at the two companies very briefly then we see that Potash is around the double size of K+S and with a weak euro and the possibility to get money for free I understand that they want to take over a well run competitor.