Analysis of HM 2017

Company: H&M

ISIN SE0000106270 | WKN 872318

Business: Fashion retail with H&M, & Other Stories, Cheap Monday, COS, Monki, Weekday and Arket. The currently have online offerings in 43 of their markets.

Active: They have over 4500 stores in 69 markets. They are pretty much half the size of Inditex which shows us how large they can become. The main markets are in Europe where they are well established but also in North America. They have few stores in South America, Asia, Middle East and Africa.

P/E: 17.6

For the previous analysis please see Analysis of HM.

The P/E is, for me, high with 17.6 as is the P/B with 5.4 which gives that Graham would not be much interested in this company. The earnings to sales have kept dropping and is now down at 8% which is not that good but the ROE is excellent with over 30%. The book to debt ratio is good with 1.6.

In the last five years they have shown a yearly revenue growth rate of 9.6% which is excellent and this then gives us a motivated P/E of around 25 to 27. 

They pay an excellent dividend in the size of 4.9% which correspond to 87% of their earnings which is a bit on the high side but H&M has been doing this for a long time now so they are able to handle it.

Conclusion: Graham says not but I say yes. Back in the days when I made my previous analysis I said that if it were to drop below P/E of 20 then I would be interested. It has dropped with means today that the P/E is good, the ROE is excellent, the book to debt is fine and the yearly growth rate is excellent. You probably realise why I made this analysis...