The Geberit Group (OTCPK:GBERY) is a Switzerland-based multinational specialized in the manufacturing and supplying of sanitary parts and related systems throughout Europe and the world. The group has around 12.000 employees. It is one of the leading companies in its field in Europe and one of the most influential in the world. It's not the largest toilet producer in the world: other firms such as Toto (OTCPK:TOTDY) are significantly greater in size and also worth a look at from an investment perspective. This article will focus on a fundamental analysis of GBERY.
I have covered topics in the water industry before, such as ETFs focusing on water scarcity. The next article in this series will focus on a fundamental analysis of TOTDY.
Geberit: Latest Results
A few months ago, the Geberit Group posted results which were in line with expectations. Considering the challenging environment the Geberit Group is currently in, I would interpret the results as better than expected. Overall, revenue increased by 20% in the first six months of 2015, in organic terms net sales grew by 2.5%. Net adjusted income dropped by 1.2% to CHF 325.6 million. Currency-adjusted net sales growth in 2015 is expected to be around 2 to 3%. This growth was achieved despite a currency rebate of 10% in the Swiss market.
Back in April of 2015, the board of directors announced another dividend hike of 10%. This was positive news as it was anticipated dividend might decline due to the one-off issues on the books caused by the acquisition of Sanitec. The timing of the acquisition of Sanitec was unlucky as it got acquired in October of 2014 and the Swiss National bank dropped the cap on the Euro in January of 2015.
Sales are expected to grow in the coming years, overall at an average rate of 5% for the coming 2 years. The firm has its costs and earnings quite in control. From a P/E perspective, both GBERY and TOTDY are valued relatively similar. The Altman-Z score is over 10, indicating financial strength which should allow GBERY to weather through economic downturns.
The consensus by analysts has remained relatively the same over the last few months (the green dotted line) while the actual share price has declined (the black line):
This indicates some potential mispricing in the stock as the share price went down since the National Bank dropped the cap back in January.
Actual growth of Geberit is highly dependable upon the economy within countries. In the beginning of 2015, growth was specifically high in the United Kingdom with 9.5%, Nordic Countries 7.9% and Germany with 3.2%. Also outside Europe, growth numbers were positive with 11% in the US and 25% growth in the Middle East/Africa. Growth in Switzerland declined with -8%.
Geberit should not be avoided by investors. The fact that it is based in Switzerland makes it a risky investment due to the decision of the Swiss National Bank to stop the cap with the Euro. Since then, Swiss based companies had issues with their denoted income in CHF. Nevertheless, the firm has been profitable for years and there are no signs that the firm will see significant financial issues the coming years. Unfortunately at a P/E of over 20, it does not come cheap.
Geberit will announce earnings on the 27th of October. It's an interesting stock which should be on everybody's watch list. I am expecting that management will continue to hold its opinion in regards of the contracting revenue growth for the rest of this year and beginning of next year. This with the exception of revenue in countries like Germany, UK and Poland. The first two might benefit due to the massive migration of immigrants from Syria and neighboring countries.
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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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