Fresenius: A Strong Buy After A 65% Sell-Off

Manuel Bleve profile picture
Manuel Bleve
81 Followers

Summary

  • By investing in Fresenius now, we can expect a compounded annual growth rate between 10% and 24% for the long term.
  • Fresenius is set to grow supported by positive tailwinds and macro trends.
  • Fresenius is investing heavily in its businesses, and this will pay off in the following years.

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After a 65% sell-off from its all-time high, Fresenius (OTCPK:FSNUY) is now too cheap to pass up. The worst is likely behind us and the company is set to growth supported by long-term positive tailwinds.

In this article, we will use a discounted cash flow analysis to determine the expected internal rate of return of this investment in three different scenarios. Before jumping into the model, we will walk through all the assumptions at the base of it to give a better explanation of what will be the main drivers of future free cash flows.

Revenue

According to the latest conference call - FY/19 Results, management sales growth target for 2020-2023 (compounded annual growth rate) is 4-7% (organic) plus 1% through small to mid-size acquisitions.

I think that using more than a 6% organic growth rate is a little bit too optimistic in the current macroeconomic environment, and in my model, I preferred to be more conservative, using a 4% CAGR for the worst-case scenario, a 5% CAGR for the base-case scenario, and a 6% CAGR for the best-case scenario.

Historical trends:

Analyzing the financial statements of the company, I went back until 2008 and I could observe that since 2011, the sales annual organic growth rate has been between

This article was written by

Manuel Bleve profile picture
81 Followers
I'm a 21-years old certified Financial Modeling & Valuation Analyst (FMVA) with 2 and a half years of experience in investing. I'm in the last year of my Bachelor's Degree in "Labour and corporate relations advisor" and, in September, I will start my first year of my Master's Degree in Finance. In December, I will attend the CFA Level I exam.

Disclosure: I am/we are long FSNUF. 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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