Celesio AG : Overvalued relative to peers, but may deserve another look

Celesio AG relative valuation is now OVERVALUED. It was previously rated NEUTRAL, and has a fundamental analysis score of 38.

Our analysis is based on comparing Celesio AG with the following peers – Cardinal Health, Inc., McKesson Corporation, AmerisourceBergen Corporation and BioScrip, Inc. (CAH-US, MCK-US, ABC-US and BIOS-US).

Relative Valuation

Celesio AG’s price of USD 5.44 is greater than CapitalCube’s implied price of USD 5.21. At this level, CapitalCube believes that Celesio AG is overvalued. Over the last 52 week period, the stock has fluctuated between USD 5.29 and USD 5.86.

Relative Valuation

Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It trades at a lower Price/Book multiple (1.87) than its peer median (3.92).
  • The market expects CAKFY-US to grow more slowly than its peers and for its median ROE to decline.
  • CAKFY-US‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • Over the last five years, CAKFY-US‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • CAKFY-US‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • CAKFY-US‘s operating performance may not allow it to raise additional debt.

Investment Outlook

Celesio AG has a fundamental score of 38 and has a relative valuation of OVERVALUED.

Celesio AG is on the bottom right quadrant of CapitalCube’s Value – Price Matrix. We therefore classify Celesio AG as ‘Speculative’. In other words, not only is Celesio AG’s Fundamental Analysis Score low at 38, but it is also potentially overvalued, in that it trades at a price higher than its CapitalCube Implied Price of 5.21.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

The market expects CAKFY-US‘s curre nt median rates of return to decline.

The market expects less growth from CAKFY-US than the median of its chosen peers (P/E of 10.89 compared to peer median of 15.14) and for its current rates of return that are around peer median (ROE of 18.32%) to decline.

The company trades at a lower Price/Book multiple of 1.87 compared to its peer median of 3.92.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

CAKFY-US has moved to a relatively low P/E from a relatively high P/E profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Source: capitalcube 2017 (http://www.capitalcube.com/blog/index.php/celesio-ag-overvalued-relative-to-peers-but-may-deserve-another-look-2/)