Air Products & Chemicals is not a first choice for DGI investors. This is mainly because it’s not a name like Coca-Cola which everyone knows and mostly use. I was analyzing APD once so far and I found it too expensive. Mistakes happens, let’s see whether it’s time to correct them.

To read more about company please click here.

I would like only to bring one issue from the last post:

I also like a lot management philosophy:

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This should be viewed together with:

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Well, with such focus in long term investors are highly probable to be happy J

Coming back to analysis, let’s look on financial results:

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That was a good year for company. EPS is up by 14%, share price is up by around 18%, so we can say that share price change is justified in fundamentals and company was not rerated.

On the other hand current valuation:

EV/EBITDA ~12 times

P/E ~ 23

Dividend yield 2.3%, but number of shares outstanding is growing by around 0.5%-1% -> this is negative in long term!

2017 should be strong again, around 10% growth is expected. As earnings presentation shows: Major restructuring of Air Products is behind us. This can be seen in EBITDA margin. Most of this is included in current share price, the question is what’s target EBITDA margin. I am not an expert, but for me growth is done and now it will be hard to grow so fast.

 

Summing up, APD is a high quality business with a strong competitive advantage. I like the business model but I do not like valuation. My motto is to never buy at all-time-highs and that’s the case of APD.

 

Disclaimer APD – no position