Common Stock: Empaques
Current Market Price: $ 14,000 COP
Market Capitalization: $ 173 billion COP
*All values in this article are expressed in Colombian Pesos (COP) unless otherwise noted.
**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.
Empaques Stock – Summary of the Company
Empaques is a Colombian textile company that produces more than 1,500 different fiber and plastic resin products for the construction, infrastructure, and agriculture industries. The company sells its products throughout Colombia and exports to nearly 20 countries. They currently employ over 1,300 people. Empaques was founded in 1938 and is headquartered in the state of Antioquia, Colombia.
Revenue and Cost Analysis
In 2019 Empaques had revenue of $ 457.3 billion, an increase compared to $ 421.3 billion in 2018. Their COGS was 373.7 billion in 2019, representing a gross margin of 18%, equal to their gross margin the previous year.
Empaques was profitable in each of the last two years. In 2019 they had net income of $ 11.6 billion, representing a profit margin of 2.5%, a slight decrease compared to 3% in 2018.
Balance Sheet Analysis
Empaques has a decent balance sheet. They have sufficient liquidity in the near term, a solid base of assets, and reasonable liability levels.
Empaques – Debt Analysis
As of year-end 2019 Empaques has total debt outstanding of $ 111.9 billion, $ 89.7 billion of which is classified as current. Some of this debt is denominated in US Dollars, exposing the company to the negative effects of a depreciating Colombian Peso.
Empaques Stock – Share Dynamics and Capital Structure
As of year-end 2019 Empaques has 12.4 million common shares outstanding.
Empaques Stock – Dividends
In 2019 Empaques pad total dividends per share of $34.79. At the current market price this implies a dividend yield of 0.2%.
Empaques Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$ 221.3 billion / $ 244.1 billion = .9
A debt to equity ratio of .9 indicates that Empaques uses a mix of nearly equal parts debt and equity in its capital structure, relying slightly more on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$ 195.9 billion / $ 160.5 billion = 1.2
A working capital ratio of 1.2 indicates a sufficient, but not strong liquidity position. Empaques should not have a problem meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$ 14,000 / $ 19,688 = .71
Empaques has a book value per share of $ 19,688. At the current market price this implies a price to book ratio of .71, meaning Empaques stock currently trades at a discount to the book value of the company.
Empaques Stock – Summary and Conclusions
Empaques is an impressive company. They have a long history and a global presence. They are in decent financial health, with sufficient liquidity and reasonable liability levels. In addition they have been profitable in each of the last two years and pay a dividend.
However the textile industry is a tough business and Empaques has tight margins. Although I am impressed by the company, I think investors can find better risk adjusted returns elsewhere. Investors can compare Empaques stock to other Latin American textile companies, such as the Brazilian manufacturer Dohler.
Disclaimer
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.
