Monday, 25 April 2016

Analysis of FMC 2016

FMC, a German dialysis producer and service company

Company: FMC 

ISIN DE0005785802 | WKN 578580 

Business: A German medicinal products and service company that are mainly active within the dialysis field. The equipment is sold to hospitals, clinics as well as private people so that they can perform the dialysis at home on their own. The maintenance of the equipment and the exchange of filters is a growing market year by year. 

Active: Present in 50 countries world wide and are running 3,418 dialysis clinics. Their products and services are offered in 120 countries.

P/E: 22.7 

Here you can find the previous analysis of FMC 2015

contrarian values of P/E, P/B, ROE as well as dividend for FMC

The P/E for FMC is very high with 23.2 and even though the P/B is a bit better with 2.4 we still end up with a no go from Graham. The earnings to sales I find low with 6% and the ROE is also not something to jump around in happiness over with its 10.4%. The book to debt ratio is at 0.6 which I also do not like that much but I can kind of understand it due to their service approach with dialysis clinics all over the world.
In the last five years they have had an excellent yearly revenue growth rate of 5.5% which gives a motivated P/E of 16 to 20 which means that FMC is a little bit overvalued at the moment.
They intend to keep and hopefully also increase the market share and for this reason they spend 13% on R&D which I find to be on the low side to be honest.
The dividend is useless since it is only 1.1% and yet it correspond to 25% of their earnings so they must improve their earnings significantly.

Conclusion: Graham says no to FMC and so do I. The P/E is too high, the dividend it too low as is the ROE for this company. I like their products, I like that they corner the market with their clinics but the earnings are simply not there! Sure the revenue has grown very well but for the last five years but during the same period the earnings have been flat so the competition must be tough which additionally makes me decide to stay away from this company.

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