PPG Industries was founded in 1883 year. Broadly speaking company is a global supplier of paints, coatings, specialty materials, chemicals, glass and fiberglass, but after portfolio reorganization revenues come from mainly coatings (~93%).
Company operates worldwide, about 47% of revenues are generated in North America, 31% in EMEA, 16% in Asia/Pacific, 6% Latin America.
In the last years market was growing, which is reflected in financial performance and share price. The question is when this trend can change and what are key risk factors. For me it is hard to buy on such market momentum – I prefer buying good companies when market in bottoming.
I like a lot cash deployment, nevertheless I see strong potential to increase dividends due to lower acquisitions.
As it comes to financials (estimates):
Market cap ~ $25B
Net debt ~$2B
Payout ratio ~25%
Beta = 1.6
Dividend yield 1.6% + buyback, historically in years 2005-2014 dividend was on average the same value as buyback
Estimated valuation ratios:
EV/EBITDA = 9.6
P/E = 14.7
PPG Industries is one of The Dividend Aristocrats with history of increasing dividend payments since 1973 year. Currently dividend yield is around 1.6% – nothing special for me, but we should notice that payout ratio is low.
Drawdown risk analysis:
Share price was very volatile last days. Curreny drawdown is around 20% which starts being attractive. I think that at 30% drawdown I will consider buying shares, because currently multiples are not low in my opinion. Moreover I am looking for higher dividend yield. I will come back and have a look again at around $82.
Summing up, PPG Industries is a high quality business with strong balance sheet. Nevertheless I do not feel the story of buying shares now. Valuation is rather high, dividend yield is a little bit too low for me and I see margins rather high taking into account business cycle.
Disclaimer PPG – no position