Hornbach-Baumarkt AG – Value Analysis (XETRA:HBM) : December 19, 2017

Capitalcube gives Hornbach-Baumarkt AG a score of 50.

Our analysis is based on comparing Hornbach-Baumarkt AG with the following peers – HORNBACH Holding AG & Co. KGaA, SAMSE SA, Kingfisher Plc and Travis Perkins plc (HBH-DE, SAMS-FR, KGF-GB and TPK-GB).

Investment Outlook

Hornbach-Baumarkt AG has a fundamental score of 50 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It’s current Price/Book of 0.94 is about median in its peer group.
  • The market expects HBM-DE to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • HBM-DE‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • 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.
  • HBM-DE‘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 median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • HBM-DE‘s revenue growth in recent years and current P/E 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 is likely overinvesting in a business with only median returns.
  • HBM-DE might have enough interest coverage to take-on additional debt prudently.

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Leverage & Liquidity

HBM-DE might have enough interest coverage to take-on additional debt.

  • While HBM-DE‘s debt to enterprise ratio of 33.59% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 33.59%), it also enjoys a relatively high interest coverage level of 6.31x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 4 peers for the company have an outstanding debt balance.

HBM-DE has maintained its Some Capacity profile from the recent year-end.

  • HBM-DE‘s interest coverage is greater than (but within one standard deviation of) its five-year average interest coverage of 5.28x.
  • The increase in its interest coverage to 6.31x from 4.21x (in 2017) was also accompanied by an increase in its peer median during this period to 14.76x from 5.64x.
  • Interest coverage fell 7.01 points relative to peers.
  • HBM-DE‘s debt-EV continues to trend downward and is below (but within one standard deviation of) its five-year average debt-EV of 39.50%.
  • Though its debt-EV decreased to 33.59% from 35.24% (in 2017), its peer median remained relatively stable during this period at 33.59%.
  • Relative to peers, debt-EV fell 1.70 percentage points.

Access the detailed analysis for Hornbach-Baumarkt AG

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
HORNBACH Holding AG & Co. KGaA 34.34 2.04 6.66 32
SAMSE SA 35.43 1.54 18.86 28.57
Kingfisher Plc 3.29 1.2 41 350.13
Travis Perkins plc 15.64 1.44 14.76 65.37
HORNBACH Baumarkt AG 33.59 2.01 6.31 37.24
Peer Median 33.59 1.54 14.76 37.24
Best In Class 3.29 2.04 41 350.13

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Company Profile

Hornbach-Baumarkt AG engages in the operation of a chain of megastores. It offers do-it-yourself (DIY), home improvement, and gardening products. It operates through the Retail and real estate segments. The Retail segment includes DIY megastores and garden centers grouped together, as well as the the online shops in other European countries. The Real Estate segment focuses on the retail properties, which charge the properties to the respective DIY stores with garden centers. The company was founded by Michael Hornbach in 1877 and is headquartered in Bornheim, Germany.

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