Covestro - plastic fantastic?

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Covestro AG is a spin-off of Bayer AG and was put on the German Stock Exchange in 2015. Covestro is the world market leader in creating high-performance plastics (also known as a polymer). High-performance plastics differ from standard plastic primarily by their temperature stability, chemical resistance, and mechanical properties. 

The main industries served are automotive manufacturing, electronics, construction, and home products, and sports and leisure, sounds like they are everywhere in our lives! 

The stock closed today at €55.86, and the 52-week high was at €63.24, and the 52-week low at €23.54, this means we are closer to the high than the low.  ❌

The 1-year, 3-year and 5-year development has been +79%, -27% and +58%!

The long-term chart, i.e. 5-years

It looks like that the downward trend since end-2017 was broken in June 2020 and has continued its way upward

The 1-year chart confirms the upward trend, see below!

Shareholders:

The biggest shareholder is Norges Bank Invest, with almost 5%, followed by Bayer at almost 3% and Union Invest Privatfonds at as well almost 3%. We see Blackrock and Vanguard here too, which is a good sign and a high free float of 76%! ✅

Next to the Balance sheet and the assets

Total Assets have grown in the last 5 years by ~€3 billion. The cash alone ("Kassenbestand") grew ~€ 1.2 billion, which is 40% of the total assets. No high Goodwill nor Intangibles, but a nice big portion of PPE ("Sachanlagen")! So the question I already now have is if this is a high Capex business!?

Total Equity and Liabilities

The Debt-to-equity ratio is roughly 60%, with 50% of the long-term debt in pension obligations. This is a rock-solid balance sheet where we see a nice increase in shareholder equity ("Summe Eigenkapital") ✅

Income Sheet

The revenue has been down for 2020, expected, but it looks that the revenues were somewhere in the area of €12-14 billion in the last 5 years. The Years 2018 and 2017 were the top years of EBIT, with ~€2.5 billion in earnings, which reflects as well the lower bottom-line ("Jahresüberschuss) in 2019 and 2020. Overall this looks ok! ✅

The dividend yield is at today's price at 2.39%, and has increased in absolute terms from last year, but it's only half of that in 2018 and 2017! We need to wait and see if the trend with increase dividends continues ✅

Summary: Even though it is a stable company, with a good balance sheet and ok earnings, some points that might need to expect more for is the trend of not growing revenues the last 5 years, low EBIT margin (actual 6.5%), high Reinvestment needs (CapEx) and by that low Return-on-equity of 8%! Let's see if this is only due to the last 2 years, I would have been ok with that 2020, but how come 2019 is that low too!?