Trickyt57
Long

Groupe S.E.B. SA (SK.PA) of France: EPS rising.

EURONEXT:SK   S.E.B
S.E.B. SA ( SEB ) (Symbol SK.PA), is a global supplier of Kitchen and household equipment. (White goods) Brand names include include All-Clad, Krups, Moulinex, Rowenta, Tefal and WMF Group. They make non-stick cookware, bakeware, stainless roasters, coffee machines, tea machines, juice squeezers, meat cutters, food vacuum packs, bar-tender equipment, beer servers, blenders, bar-b-q equipment, food warming plates, cookers, bread-making machines, crepe and waffle machines, ovens, microwaves, boilers, kettles, coffee pots and servers, chip machines, electric cooking pots, toasters, vacuum cleaners, air filters, robotic cleaners, steam irons, electric razors, head, ear, and nose hair trimmers, soy-milk makers, air purifiers, pressure cookers, pans, saucepans, frying pans, table cookers snd warmers, cutlery, knives, cutters and slicing devices, weighing machines, scales, and hundreds of other practical household goods.

Whilst the chart of the share price is not giving off any particular buy or sell signal, the shares do look attractive on fundamentals. Here are the things which I like:

SEB has a Track-record of increasing turnover: organic sales growth in the three years to 31 Dec 2018 was +6.1%, +9.2%, +7.8%. In the Q3 2019 results the company said: “ Organic sales growth now expected between +6% and +7% vs. over 7% as announced at end-July”

Rising dividends: the dividend has risen by 9% p.a. over the last 10 years. The 2018 dividend was EUR 2.14, vs 2017 of 2.00, an increase of 7%. Given the forecast of increased earnings for 2019, I am expecting the dividend will continue to be increased. Whilst the dividend of 1.57% is not high, it seems both secure and growing. Certainly it is attractive compared to the interest on cash deposits or bonds.

The Dividend is well covered by earnings: the 2018 EPS were EUR 8.38, nearly four times the dividend of EUR 2.14. This leaves plenty of scope to keep increasing the dividend.

SEB is Increasing its earnings per share ( EPS ): Reported EPS over the last 5 years have been as follows: EUR 3.45, 4.14, 5.15, 7.50, and 8.38. Given SEB’s own recent forecast of a 6% to 7% rise in sales for 2019, I think profits and EPS should increase again this year. The company said in its Q3 2019 report, Outlook section, that it expects an increase in “Operating Result from Activity” of around +6% for the full year.

SEB has a Modest Price/Earnings (p/e) ratio: The share price (at the time of writing on Monday 30th December 2019) is EUR 133.50. With 2018 EPS of EUR 8.38, this gives us a trailing p/e ratio of 15.93, in line with the market and relatively cheap for a company with prospects of above average growth. That’s equivalent to an earnings yield of over 6%. Not bad considering alternatives like cash deposits in EUR.

SEB is a Mid-size company. The market cap is EUR 6.8 billion. Mid cap stocks are often over-looked by analysts, until they suddenly have a spurt, and become large-cap. Despite the rises in EPS , the shares have not participated in the 2019 rise in share prices. The share price stands at around the same level as two-and-a-half years ago. In my opinion this means the shares are over-looked.

Trading the shares is relatively easy. The average daily trading volume represents around EUR 8 million.

SEB has hundreds, if not thousands, of products. I prefer companies with multiple products or services. If one goes out of fashion, then another may be coming into favour. It’s kind of a safety net, so you know that you are not going to find that a large competitor has suddenly made something better than its only product. It won’t turn out to be the next MySpace or AltaVista.

The kind of products being sold by SEB are not going to go out of fashion. Housewives are not going to suddenly stop cooking their food or vacuuming the floor. We will always use toasters and coffee machines, ovens, trays and blenders. We will always need pots, pans, fryers, and so on. It’s relatively low tech stuff, but the demand is growing as the world becomes more affluent. Once you have used a Teflon non-stick frying pan, it’s hard to go back to the old style pan.

Conclusion: SEB has a lot of attractive features for investors. If this was a larger company, the multiple would probably be over 20X. With growing sales and EPS , it has the potential to become much larger. You may need to be patient, but for long term investors it has the kind of features you should be seeking.




Comment: Please ignore the various links to stocks which have nothing to do with Groupe S.E.B. SA. Those links were inserted automatically by tradingview and have nothing to do with me.

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