New Value Analysis of Nestle S.A. (VX:NESN)

Published by Studio 61 Wealth Management at 6th August 2017

Nestle corporate image 2017-08-07 at 12.02.34

New Value Analysis of Nestle S.A. (VX:NESN)

A new value analysis of Nestle S.A. (VX:NESN), a company listed on the Swiss Stock exchange, has been added to our research pages here.

Nestle is the world’s largest (by market capitalisation) food and beverage company. Nestle has more than 2000 brands and has a presence in 191 countries.

Why would a value investor consider an investment in Nestle?

Nestle is one of those common stocks that can go into almost any portfolio. The company is conservatively financed and has a long history of making profit and returning value for owners of the common stock.

The only real decision a value investor has to make is how much to pay for the earnings from Nestle. Right now Nestle looks a bit expensive trading at around 30 times the reported earnings in the 2016 Annual Report. However, a non-cash tax adjustment depressed the reported earnings number in the 2016 Annual report.

Nestle has just released trading results for the first half of 2017. You can see the announcement here. The trading results for H1 2017 make mention of the impact of the tax adjustment in the 2016 Annual report. The trading results also show improved earnings per share. The improved earnings per share would make a price to earnings ratio of around 26 if they continued for the rest of 2017.

A P/E of 26 is still a bit expensive for investors looking for real value.

Every investor has to make up their own mind whether the current price is acceptable for an investment. Nestle traded at about 10 times earnings back in 2008 after the stock split so was very cheap in 2008. By 2011 the stock traded at 25 times earnings and has been as low as 15 times earnings in 2014, but that was as cheap as Nestle ever traded in the last 10 years.

It might be reasonable to consider an initial position at whatever price you can get with the intention to hold for a long time and buy more if Nestle gets cheaper at any point in the future.

To get all the other statistics needed to make an informed decision and find out if a value investor should consider an investment in Nestle common stock click here to download the new analysis.

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