What is ChemoMetec A/S:
ChemoMetec A/S is a biotechnology company specializing in the development and manufacturing of cell and gene technology. One of their key products includes the NucleoCounter® series, which is used for measuring cell density and cell viability in samples of blood, milk, and more.
These instruments are used in research laboratories and biotechnological production facilities that need accurate cell analysis to achieve reliable results. Hence, their products are closely related to health, food, and research.
Strategy:
ChemoMetec's strategy focuses on innovation and customer satisfaction. The company invests in research and development to ensure that their products remain at the forefront of technological advancement.
Furthermore, they emphasize providing comprehensive support and training for their customers, such as technical support and operator certification.
They have also worked to create their own ecosystem. Having set the gold standard in cell counting, the company has very few/small direct competitors. They sell the entire equipment, as well as consumables. "Think of a razor with blades." This model generates continuous revenue and has significantly contributed to ChemoMetec's income in recent years.
So, my interpretation of this is that with a lack of competitors and more people seeking their products, ChemoMetec could emerge very strongly, especially as service and consumable goods increase with more products in circulation.
Financial Overview:
With robust growth and overall good financial health, ChemoMetec positions itself as a company I could readily invest in. However, not everything is perfect, as a 41% decrease in instrument sales highlights the current climate for this company.
Thus, in this stock analysis, we can confirm that the market is quite challenging, and their strategy of increasing sales on "consumables and services" is what salvages what remains of this year for ChemoMetec.
I feel that a -41% in Q3 and -43% from Q1-Q3 indicate significant problems and risks.
However, I can also argue that if the market improves, ChemoMetec will stand very strong.
Statement
With a tenfold increase in top-line growth and even more on the bottom line, along with margins that have reached 40-50%, I have nothing to complain about when it comes to the company. I feel they have done an incredibly good job with this, and I give a strong thumbs up!
Net Income | EBIT | Results | Margins | EBIT margin | |
13/14 | 45229 | 1646 | 1150 | 2.54% | 3.64% |
14/15 | 61239 | 5828 | 8110 | 13.24% | 9.52% |
15/16 | 85232 | 15897 | 10499 | 12.32% | 18.65% |
16/17 | 90329 | 10419 | 7486 | 8.29% | 11.53% |
17/18 | 112687 | 24284 | 18215 | 16.16% | 21.55% |
18/19 | 175513 | 54079 | 41845 | 23.84% | 30.81% |
19/20 | 214101 | 77470 | 59163 | 27.63% | 36.18% |
20/21 | 281127 | 116023 | 88354 | 31.43% | 41.27% |
21/22 | 427160 | 202854 | 159469 | 37.33% | 47.49% |
22/23 | 442274 | 230561 | 178667 | 40.40% | 52.13% |
Balance
Even though debt has increased since the start of this analysis, the company stands very strong, especially since the debt can easily be paid off with the income from just one quarter alone. They have good liquidity, built up quite strong equity. Financially, the company looks solid, and I have nothing to complain about here, except that they could perhaps have eliminated all debt/leasing costs!
Interestbearing | Debt | Equity | Total Assets | Cash | |
13/14 | 1755 | 6821 | 44529 | 51350 | 472 |
14/15 | 7833 | 17116 | 46350 | 63466 | 843 |
15/16 | 11167 | 33530 | 56849 | 90379 | 19 |
16/17 | 21854 | 33243 | 64377 | 97620 | 46 |
17/18 | 23882 | 40985 | 73010 | 113995 | 46 |
18/19 | 18795 | 64874 | 173341 | 238215 | 111 |
19/20 | 2291 | 60365 | 202751 | 263116 | 111 |
20/21 | 2358 | 79932 | 264977 | 344909 | 172 |
21/22 | 6794 | 144068 | 357205 | 501273 | 303 |
22/23 | 7160 | 124934 | 533042 | 657976 | 318 |
Cash flow
Once again, we see strong finances in the company; they spend one-third of their money on investments, and the rest goes into the bank. They offer reasonable dividends based on their earnings, and the only thing I feel is holding this company back at the moment is the price. It's expected that the company will make money. It is anticipated that they will continue their growth, and dividends at 50% of earnings come out as a 1-2% yield based on current values.
In general, another thumbs up from me!
cash flow Operations | Investment | Finance flow | Dividend | Leasing | |
13/14 | 5667 | -7090 | -787 | 0 | -787 |
14/15 | 13394 | -9300 | -2128 | 0 | -838 |
15/16 | 17200 | -28441 | 12117 | 0 | -672 |
16/17 | 9757 | -10281 | -355 | 0 | -245 |
17/18 | 25436 | -16462 | -7927 | 0 | -392 |
18/19 | 58310 | -27060 | 57779 | 0 | -892 |
19/20 | 72016 | -26605 | -46260 | -356751 | -809 |
20/21 | 107901 | -24683 | -26037 | -26104 | -854 |
21/22 | 176860 | -56046 | -69012 | -69012 | -1729 |
22/23 | 154146 | -40831 | -2925 | 0 | -2844 |
Advantages and Risks
Strengths and Competitive Advantages
Strong control over its domain: With few competitors, ChemoMetec enjoys good margins and strong control over its niche market.
Costly products: It requires a significant effort from the buyer to switch from Product A to Product B. This makes it difficult to change suppliers due to training costs, new equipment, etc.
Diversified: While it may seem odd for a company focused on a narrow niche, they are diversified in several ways. A: How the business model is set up, where they saved the entire year's accounts with service and consumable revenues. B: Sector exposure. Multiple sectors engage in cell counting, so even if certain areas are struggling, others may remain strong.
Financial situation: The company pays dividends, has had good historical growth, and has shown steady legs and good control.
Challenges and Risk Factors:
Larger players could enter: With the margins ChemoMetec achieves, it may interest larger players to enter the segment and compete with ChemoMetec in the future.
Patents expiring: One of ChemoMetec's patents expired in 2023, which could aid competitors in entering the technology.
The company is highly priced: With a P/E over 40, many expect the company to grow in the future. It's difficult to find a low pricing for the company, and there could be downside risk if they fail to meet expectations over time.
Conclusion
Future Prospects:
With an improved market, ChemoMetec could profit from further growth and increase instrument sales once again.
Increased reliance on service and consumables: These areas will continue to generate revenue and will remain strong in the future as well.
New products: Can aid in further sales and required equipment.
Stock Analysis Summary:
First off, I have to mention that I own a small portion of ChemoMetec. Otherwise, the company is highly valued with great expectations for growth. They have demonstrated their ability to grow historically, and for me, they appear very interesting for the future.
They distribute dividends and operate in a relatively defensive sector, which we believe is challenging to directly enter without significant investments. They are in excellent financial shape, even though sales have decreased, and they stand strong during tough times.
Overall, I am very positive about the company but must warn about downside risks.
A 40% decline in instrument sales is significant, and personally, I believe they need to address this moving forward. However, it's important to be aware of the risks.
If you wish to delve deeper into the numbers, you can find the stock on my index page, where I have granted Google Sheets read access for those interested.
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