Analysis of Infineon 2016

Company: Infineon 

ISIN DE0006231004 | WKN 623100 

Business: A German semiconductor company. They seem to have completely changed the structure so now they are talking about product categories or applications. Here is the list of their products: Power, ASIC, Automotive System IC, ESD & Surge & Fuse, HiRel, Microcontroller, RF & Wireless Control, Security & smart card solutions, Sensor, Interface, Transistor & Diode and finally Evaluation Boards.

Active: Claim to have 35,400 employees world wide. 

P/E: 22.4

Here you can find the previous analysis of Infineon 2015. 

The P/E for Infineon is too high for me with 22.4 and so is the P/B with 3.0 which gives a no go from Graham. The earnings to sales are however excellent with 11% and the ROE is ok with almost 14%. The book to debt ratio is also good with 1.1.
In the last five years they have shown an excellent yearly revenue growth rate of 7.7% which then gives us a motivated P/E of 19 to 24 which means that Infineon is today fairly valued on the stock market.
The need to stay ahead of the competition and for this reason they spend a crazy amount into R&D namely 113% of their earnings. I find that to me too much.
They pay a tiny dividend in the size of 1.6% which correspond to 36% of their earnings so they better keep pushing up those earnings in the future!

Conclusion: Graham says no to Infineon and so do I. The P/E and P/B is too high. The dividend is too low and the ROE is also not very interesting. They have shown an excellent growth rate which is impressive but it is not enough for me in this case especially not since their earnings were doped with a 102 M € tax refund and without that the situation would look even worse.

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