Analysis of Henkel 2015

Company: Henkel

ISIN DE0006048432 | WKN 604843 

Business: A German consumer products company that are divided into three business units: Laundry & Home Care (28% of revenue, product examples: Persil, Purex and Pril) , Beauty Care (22% of revenue, product examples: Schwarzkopf, Dial and Syoss) and finally Adhesive Technologies (49% of revenue, product examples: Loctite, Teroson and Technomelt). 

Active: In 75 countries world wide.

P/E: 28.4

Here you can find the previous analysis of Henkel 2014. 

The P/E is awful high with 28.4 and the P/B is also too high with 4.0 which gives a clear no, no from Graham. The earnings to sales look very good with 10% but the ROE is less than what one would hope for but still it is 14%. The book to debt ratio is excellent with 1.3.
In the last five years they have had an yearly revenue growth of 1.7% which is not very good and this then gives us a motivated P/E of 9 to 12 which means that Henkel is highly overvalued on the market today.
They spend a good amount of money on Research and Development since it correspond to 25% of their earnings.
The dividend is tiny with 1.2% which still correspond to 35% of their earnings so in my opinion they really need to push up their earnings (better yet drop around 50% in share price and I would buy them directly).

Conclusion: Graham and I are both negative towards Henkel at this moment. The P/E and P/B is far too high, the ROE is mediocre and the dividend is far too low. It is a clear no go for this great company with excellent products.

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