GKN Plc – Value Analysis (LONDON:GKN) : December 26, 2017

Capitalcube gives GKN Plc a score of 75.

Our analysis is based on comparing GKN Plc with the following peers – Torotrak plc, AB Dynamics plc, Kongsberg Automotive Holding ASA and Sogefi SPA (TRK-GB, ABDP-GB, KOA-NO and SO-IT).

Investment Outlook

GKN Plc has a fundamental score of 75 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It’s current Price/Book of 2.12 is about median in its peer group.
  • We classify GKN-GB as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • GKN-GB has relatively high profit margins while operating with median asset turns.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • GKN-GB‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While GKN-GB‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • GKN-GB has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

GKN-GB has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 18.93% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 39.54%), and a well-cushioned interest coverage level of 7.23x, GKN-GB can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 4 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include ABDP-GB.

GKN-GB has maintained its Quick & Able profile from the prior year-end.

  • GKN-GB‘s interest coverage is its lowest over the last four years and compares to a high of 8.33x in 2012.
  • The decrease in its interest coverage to 7.23x from 7.94x (in 2015) was also accompanied by a decrease in its peer median during this period to 4.30x from 7.01x.
  • Interest coverage rose 2.00 points relative to peers.
  • GKN-GB‘s debt-EV continues to trend upward and is above (but within one standard deviation of) its four-year average debt-EV of 16.94%.
  • The increase in its debt-EV to 18.93% from 16.75% (in 2015) was also accompanied by an increase in its peer median during this period to 39.54% from 16.75%.
  • Relative to peers, debt-EV fell 20.61 percentage points. Unlike the peer median, it is also below the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Torotrak plc 109.93 2.36 -42.85 -303.54
AB Dynamics plc 0 3.42 No interest exp 999
Kongsberg Automotive Holding ASA 39.54 1.6 3.77 25.88
Sogefi SPA 41.19 1.03 4.3 29.24
GKN plc 18.93 1.51 7.23 86.82
Peer Median 39.54 1.6 4.3 29.24
Best In Class 18.93 3.42 No interest exp 999

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Company Profile

GKN Plc engages in the manufacture of facilities, service centers and offices. It operates through the following segments: GKN Aerospace, GKN Driveline, GKN Powder Metallurgy, and GKN Land Systems. The GKN Aerospace segment focuses on the supply of aerostructures, engine products and systems, and electrical wiring systems. The GKN Driveline deals with the supply of automotive driveline systems and solutions. The GKN Powder Metallurgy involves in the manufacture of sintered components and in the production of metal powder. The GKN Land Systems engages in the supply of power management products and services for agricultural, construction, and industrial equipment. The company was founded on September 19, 1759 and is headquartered in Redditch, the United Kingdom.


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