ConvaTec Group Plc – Value Analysis (LONDON:CTEC) : October 6, 2017

Capitalcube gives ConvaTec Group Plc a score of 47.

Our analysis is based on comparing ConvaTec Group Plc with the following peers – Micropos Medical AB, Medtech Holdings Ltd., Mainstay Medical International Plc and Cochlear Limited (MPOS-SE, MMDZ-ZW, MSTY-FR and OC5-DE).

Investment Outlook

ConvaTec Group Plc has a fundamental score of 47 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • CTEC-GB has traded publicly for less than a year.
  • It’s current Price/Book of 5.25 is about median in its peer group.
  • CTEC-GB‘s EBITDA-based operating performance is better than its peers. The price to EBITDA multiple does not imply high future growth but seems to predict the company will maintain its relatively high operating returns on the existing level of capital.
  • CTEC-GB‘s relative asset efficiency and net profit margins are both around the median level.
  • Changes in annual revenues are in line with its chosen peers but lags in terms of earnings suggesting that the company is less cost conscious and may be spending for growth.
  • CTEC-GB‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • CTEC-GB‘s revenue growth in recent years and current Price/EBITDA ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • CTEC-GB‘s operating performance may not allow it to raise additional debt.

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Leverage & Liquidity

CTEC-GB would seem to have a hard time raising additional debt.

  • With debt at a relatively low 18.85% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 13.75%), and relatively tight interest coverage level of 1.20x, CTEC-GB would have a hard time raising much additional debt. Thus, the company is classified as having Limited Flexibility when it comes to raising more debt.
  • All 4 peers for the company have an outstanding debt balance.

CTEC-GB has moved to a Constrained from a Limited Flexibility profile at the prior year-end.

  • CTEC-GB‘s interest coverage is upward trending and is now similar to its four-year average interest coverage of 0.97x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (1.20x) and the peer median (-1.25x).
  • CTEC-GB‘s debt-EV is its lowest over the last four years and compares to a high of 108.46% in 2015.
  • While its debt-EV decreased to 18.85% from 108.46% (in 2015), its peer median increased during this period to 13.75% from 10.37%.
  • Relative to peers, debt-EV fell 93.00 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Micropos Medical AB 0.73 4.45 -1081.34 -1770.59
Medtech Holdings Ltd. 36.01 0.82 -1.25 -8.32
Mainstay Medical International Plc 13.75 4.1 -10.73 -141.49
Cochlear Limited 2.42 1.69 41.39 134.61
ConvaTec Group Plc 18.85 2.94 1.2 10.67
Peer Median 13.75 2.94 -1.25 -8.32
Best In Class 0.73 4.45 41.39 134.61

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Company Profile

ConvaTec Group Plc is a holding company engages in medical business. Its activities include development, manufacture and sales of medical products and technologies related to therapies for the management of chronic conditions, including products used for advanced chronic and acute wound care, ostomy care and management, continence and critical care, and infusion devices used in the treatment of diabetes and other conditions. The company was incorporated in 1978 and is headquartered in Reading, the United Kingdom.


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