Fresenius Medical Care AG & Co. KGaA - A Speculative Analysis (NYSE: FMS)

Introduction: Welcome back to my weekly stock analysis. Disclaimer: I am not invested in this one. Fresenius Medical Care AG & Co. KGaA (NYSE: FMS) Sector: Full Time Employees (Industry) Company Strengths & Risks: Fresenius Medical Care is a German healthcare company specializing in kidney dialysis. For those who may not know, dialysis removes excess water, toxins and mixtures from the blood in people whose organs cannot do this process naturally. The company treats those with ESRD, which requires patients to undergo dialysis 3 times per week for life. FMS also owns the largest inpatient and outpatient hospital in Germany, and owns a supplier of essential drugs, nutritions products, and medical devices. Some activity to note was that the company acquired Shiel Medical Laboratory in 2013, and sold it to Quest Diagnostics in 2017. In 2019, FMS acquired NxStage. Strengths: - Have paid a dividend since 1998, with a gap of 2020 (covid) - Decent PE ratio - Great dividend growth rates - Essential service (dialysis) - largest hospital in Germany (Fresenius Helios) - International diversification for the US readers Risks: - Not afraid to cut or suspend dividends - Very high payout ratio - Recent civil bribery allegation settlements - Vulnerable to pandemics Financial History and numbers FMS: Numbers from Seeking Alpha as of Jan 24, 2022 Numbers from Macro Trends as of Jan 24, 2022 Stock FMS P/E Ratio 16.73 Stock price $32.71 Current Annual Payout/Share $0.82 Yield 2.51% 5 Yr Div Growth Rate 27.72% 3 Yr Div Growth Rate 35.3% 1 Yr Div Growth Rate 11.67% Years Of Growth 1 Current Payout Ratio 78.76% Free Cash Flow / Share 3.5155 Revenue (ttm) 20.790B Debt / Equity Ratio 0.4887 Debt / EBITDA 1.81518 EPS 1.96 ROI - ROA - FMS’ revenue seems to be trailing generally upwards with a minor hiccup in 2018. There was an EPS drop in 2019. The dividend cut will need to be weighted by the reader before they do their own DD. I will explain my thoughts later. The payout ratio is very high. The free cash flow seems to be strong within this company. I will now use the 3 year dividend growth rate to project further. Year FMS 2022 1.11 2023 2.03 2024 2.75 2025 3.72 For another way, let's use historical payout ratio to project out. YEAR FMS EPS estimate 2021 0.54 EPS estimate 2022 0.51 2021 dividend 0.4253 2022 dividend 0.4017 Final Thoughts: I must first start out with the elephant in the room. The civil bribery lawsuit has me skittish. I don't know if it was cheaper to fight the lawsuit or to pay the settlement but the company has made its decision. Regarding the dividend cut, I am happy that FMS decided to cut the dividend. With covid and an unknown duration of illness, not paying dividends makes sense. Especially when you don't know what percent of your clientele might become ill, die, or too paranoid to go out for treatment. That said, the pandemic will take time for numbers to correct. As of right now, I do believe that the company will hover in the 42-48 range once covid ends. Weekly price estimate for a future date, via consulting the crystal ball: Predicted price for FMS for Jun 20, 2022: $41.22. There is no factual basis that I will give. I hope someone out there found this post interesting. Please supplement this with your own research. Thank you for reading, please give me feedback so that I can increase my standards for future analysis posts. If I have made a mistake, please correct me. Or if you have one that you want an analysis on, I might pick a comment to do an analysis of if I don't have any spice stored for the week.

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Fresenius Medical Care AG & Co. KGaA - A Speculative Analysis (NYSE: FMS)

bullish

Introduction:

Welcome back to my weekly stock analysis. Disclaimer: I am not invested in this one.

Fresenius Medical Care AG & Co. KGaA (NYSE: FMS)

Sector: Full Time Employees (Industry)

Company Strengths & Risks:

Fresenius Medical Care is a German healthcare company specializing in kidney dialysis. For those who may not know, dialysis removes excess water, toxins and mixtures from the blood in people whose organs cannot do this process naturally. The company treats those with ESRD, which requires patients to undergo dialysis 3 times per week for life.

FMS also owns the largest inpatient and outpatient hospital in Germany, and owns a supplier of essential drugs, nutritions products, and medical devices.

Some activity to note was that the company acquired Shiel Medical Laboratory in 2013, and sold it to Quest Diagnostics in 2017. In 2019, FMS acquired NxStage.

Strengths: - Have paid a dividend since 1998, with a gap of 2020 (covid) - Decent PE ratio - Great dividend growth rates - Essential service (dialysis) - largest hospital in Germany (Fresenius Helios) - International diversification for the US readers

Risks: - Not afraid to cut or suspend dividends - Very high payout ratio - Recent civil bribery allegation settlements - Vulnerable to pandemics

Financial History and numbers

FMS: Numbers from Seeking Alpha as of Jan 24, 2022

Numbers from Macro Trends as of Jan 24, 2022

Stock FMS
P/E Ratio 16.73
Stock price $32.71
Current Annual Payout/Share $0.82
Yield 2.51%
5 Yr Div Growth Rate 27.72%
3 Yr Div Growth Rate 35.3%
1 Yr Div Growth Rate 11.67%
Years Of Growth 1
Current Payout Ratio 78.76%
Free Cash Flow / Share 3.5155
Revenue (ttm) 20.790B
Debt / Equity Ratio 0.4887
Debt / EBITDA 1.81518
EPS 1.96
ROI -
ROA -

FMS' revenue seems to be trailing generally upwards with a minor hiccup in 2018. There was an EPS drop in 2019. The dividend cut will need to be weighted by the reader before they do their own DD. I will explain my thoughts later. The payout ratio is very high. The free cash flow seems to be strong within this company.

I will now use the 3 year dividend growth rate to project further.

Year FMS
2022 1.11
2023 2.03
2024 2.75
2025 3.72

For another way, let's use historical payout ratio to project out.

YEAR FMS
EPS estimate 2021 0.54
EPS estimate 2022 0.51
2021 dividend 0.4253
2022 dividend 0.4017

Final Thoughts:

I must first start out with the elephant in the room. The civil bribery lawsuit has me skittish. I don't know if it was cheaper to fight the lawsuit or to pay the settlement but the company has made its decision.

Regarding the dividend cut, I am happy that FMS decided to cut the dividend. With covid and an unknown duration of illness, not paying dividends makes sense. Especially when you don't know what percent of your clientele might become ill, die, or too paranoid to go out for treatment. That said, the pandemic will take time for numbers to correct. As of right now, I do believe that the company will hover in the 42-48 range once covid ends.

Weekly price estimate for a future date, via consulting the crystal ball: Predicted price for FMS for Jun 20, 2022: $41.22. There is no factual basis that I will give.

I hope someone out there found this post interesting. Please supplement this with your own research.

Thank you for reading, please give me feedback so that I can increase my standards for future analysis posts. If I have made a mistake, please correct me. Or if you have one that you want an analysis on, I might pick a comment to do an analysis of if I don't have any spice stored for the week.

read-time
3 min
41.22
Target Price
8/ 10
Confidence
6-12 Months
Timeframe
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Earnings Release
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News
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SEC
Filing
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