Common Stock: Grupo Argos S.A.
Current Market Price: $ 13,900 COP
Market Capitalization: $12 trillion COP
*All values in this article are expressed in Colombian Pesos (COP) unless otherwise noted.
** The USD/COP exchange rate when this article was written was 3525/1. You can find an up to date rate by following this link.
***The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.
Grupo Argos Stock – Summary of the Company
Grupo Argos is a Colombian asset management company focused on infrastructure investments. They own a total of 51 consolidated assets, totaling COP 51 trillion in assets under management. Their investments are focused on three distinct business lines: cement, energy, and roads and airport concessions. The company is present in 18 countries and has a customer base of over 1.1 million people. More than 13,000 employees are part of the Grupo Argos business group. Grupo Argos was founded in 1934 and is headquartered in Medellin, Colombia.
Revenue and Cost Analysis
Grupo Argos had revenue of $ 16.8 trillion in 2019, a significant increase from $ 14.3 trillion in 2018. Their cost of sales was $ 12.3 trillion in 2019, representing a gross margin of 27%, a slight decrease from 28.5% the previous year.
The company was profitable in each of the past two years. In 2019 Grupo Argos had net income of $1.3 trillion, representing a profit margin of 7.4%, also a decrease compare to 8.4% the previous year.
Balance Sheet Analysis
Grupo Argos has a good balance sheet. The have sufficient liquidity, a sound base of long term assets, and reasonable liability levels.
It is worth noting the company uses currency and interest rate derivatives to hedge its foreign currency exposure. Investors should analyze this derivatives book in detail.
Grupo Argos – Debt Analysis
Fitch has rated the company’s debt as AAA, meaning it is considered investment grade.
The company has total borrowings and bonds outstanding of $ 16.5 trillion, $2.5 trillion of which is classified as current. Bonds outstanding make up $ 9.8 trillion of these liabilities, $ 952 billion of which are classified as current.
Grupo Argos Stock – Share Dynamics and Capital Structure
As of year-end 2019 Grupo Argos has 651.1 million common shares outstanding and 211.8 million preferred shares outstanding. Total shares outstanding is around 863 million shares.
Grupo Argos Stock – Dividends
The company paid dividends of $ 350 per common share in 2019. At the current market price this implies a dividend yield of 2.5%.
Grupo Argos Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$ 24.5 trillion / $ 26.5 trillion = .93
A debt to equity ratio of .93 indicates that Grupo Argos uses nearly equal parts debt and equity in its capital structure, relying slightly more on equity financing.
Working Capital Ratio
Current Assets/Current Liabilities
$ 7.2 trillion / $ 6.8 trillion = 1.05
A working capital ratio of 1.05 indicates a sufficient, but not strong liquidity position. Grupo Argos should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$ 13,900 / $ 30,700 = .45
Based on total shares outstanding Grupo Argos has a book value per share of $ 30,700. At the current market price this implies a price to book ratio of .45, meaning Grupo Argos stock currently trades at a significant discount to the book value of the company.
Grupo Argos Stock – Summary and Conclusions
Grupo Argos is a very interesting company. They are one of the largest infrastructure groups in Latin America, with a presence in 18 countries. They are in sound financial health, with sufficient liquidity and reasonable amounts of leverage.
But the company is very complex. The have three distinct business lines, each of which requires its own more detailed analysis. They also have a complex derivatives book that needs further analysis. Based on my first reading I am intrigued by the company, but I would prefer to wait for their 2020 financials and take my time with a more detailed analysis before drawing any conclusion. In the meantime, Investors can consider simpler Colombia focused companies, such as gold miner Gran Colombia.
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.
