Compare 4 big industrial companies: ABB, ASSA ABLOY, Epiroc and NIBE Industrier
ABB (ABB) manufactures and sells electrification, industrial automation, and robotics and motion products for customers in utilities, industry and transport, and infrastructure worldwide. Its Electrification segment provides electric vehicle charging infrastructure, renewable power solutions, modular substation packages, distribution automation products, switchboard and panel boards, switchgears, UPS solutions, circuit breakers, measuring and sensing devices, control products, wiring accessories, enclosures and cabling systems, and intelligent home and building solutions for integrating and automating lighting, heating, ventilation, security, and data communication networks. The company’s Robotics & Discrete Automation segments provides industrial robots, software, robotic solutions and systems, field services, spare parts, and digital services. It was founded in 1883 and is headquartered in Zurich, Switzerland.
ASSA ABLOY (ASSA B) provides door opening products, solutions, and services for the institutional, commercial, and residential markets in Europe, the Middle East, Africa, North and South America, Asia, and Oceania. The company offers mechanical and electromechanical locks, digital door locks, cylinders, door fittings, security doors, door frames, access control devices, and fire doors, as well as hardware products. It also provides identity solutions, including identity and access management, biometrics, authenticity and brand protection products, contactless RFID tags and transponders, and government IDs to companies, and government and state institutions, as well as healthcare, education, and financial industries; and secure access solutions for hotels, cruise ships, student accommodations, and elderly care facilities. It was incorporated in 1954 and is based in Stockholm, Sweden.
Epiroc (EPI B), together with its subsidiaries, develops and produces equipment, consumables, and service for use in surface and underground mining, infrastructure, civil engineering, well drilling, or geotechnical worldwide. It operates through two segments, Equipment & Service, and Tools & Attachments. The Equipment & Service segment provides equipment and solutions for rock drilling, mechanical rock excavation, rock reinforcement, loading and haulage, ventilation systems, exploration drilling, and drilling equipment for water, energy, oil and gas, as well as related spare parts, services, and solutions. It was founded in 1873 and is headquartered in Nacka, Sweden.
NIBE Industrier (NIBE B), together with its subsidiaries, develops, manufactures, markets, and sells various energy efficient solutions for indoor climate comfort, and components and solutions for intelligent heating and control in Nordic countries, rest of Europe, North America, Australia, Asia, and internationally. The company operates through three business areas: NIBE Climate Solutions, NIBE Element, and NIBE Stoves. The NIBE Climate Solutions business area offers indoor climate comfort products, such as heat pumps, ventilation products and air conditioning, climate control systems, water heaters and accumulator tanks, district heating products, solar panels, domestic boilers, commercial washing machines, and tumble dryers for homes, apartment blocks, and commercial properties. It was founded in 1949 and is headquartered in Markaryd, Sweden.
Like always we start with ROIC. We wanna see the company consistently having above 10%.
ABB was high around 29% in 2007 and constantly dropped and now is 1,41% which is really bad. ASSA ABLOY was always around 12% which is not bad. Epiroc we have very few years to look into so it will automatically means a “no-no” to us so we will just remove it from the list. We don’t care how good it is. Unless we have enough consistent info to draw a conclusion we will stay away. NIBE Industrier was around 12, went down to around 9 for a couple of years, but now is back up to 12 again, so we have to investigate those down years if we decide to move forward with this one.
Next we check the earning.
ABB has been decreasing it’s earning in the past 12 years, we don’t care if they have tripled their earning in the last year, we are looking for consistency. So we won’t waste our time anymore on this one either. ASSA ABLOY had a 8,83% increase which is not bad (considering one bad year in the middle decreased it), its net margin of 10% is not bad either. NIBE Industrier is more consistent and very high at 17,85% which is really good, their net margin has been raising and around 9% right now which probably affected the net income. But since its share number increased from 1,5 billion to 2 billion, its EPS only increased 15,39% which is still very good.
Now let’s focus on revenue.
Both showed growth, ASSA ABLOY at 8,57% and NIBE Industrier at 14,82%.
What about free cash flow?
ASSA ABLOY with earning around 7,5 billion and FCF around 9 billion in recent years can turn its earning to cash with ease. NIBE Industrier has the same capability but around 1,7 billion. So both are okey.
Now let’s check the debt and quick ratio.
ASSA ABLOY can payoff their debt in 3 years and NIBE Industrier can pay it off in 5 years which is a little bit high for our taste, but if they are using that debt to fuel their growth it should be okey.
ASSA ABLOY does not have a great quick ratio and it is usually around 0,7 and that is because of large inventory that they have. If we want to dig deeper we need to check the inventory closely. Sometimes management keep the inventory (that is outdated and will never sell) instead of accepting the loss. NIBE Industrier quick ratio is usually over 1 so is good in that regard.
Let’s look at dividend payout ratio.
ASSA ABLOY dividend payout ratio is around 50% and for NIBE Industrier it is around 30% which both are acceptable.
Now let’s sum it up.
ABB ROIC and earning was going down, so thanks but no thanks.
ASSA ABLOY has reasonable ROIC, growth, cash, debt and dividend. So we will keep it for now.
Epiroc is very young so we can’t count on the result. We will get back to it maybe in a couple of years and remove it for now.
NIBE Industrier reasonable ROIC, debt, cash, dividend and very good growth. So we will keep it as a growth company.
So we are done for today, thank you for your time and see you tomorrow.
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