BAYRY Bayer AG ADR Stock Price & News
Additionally, we can use a discounted cash flow analysis to determine an intrinsic value for Bayer. And for a DCF calculation, we need to make some assumptions about free cash flow in the years to come. For fiscal 2021, we assume a negative free cash flow of €3.5 billion (according to guidance).
- This is the company’s mission, and over time, the company has been delivering well on these.
- And in 2023 Bayer is now expecting €0 free cash flow – far away from the company’s target range, which is part of management’s compensation system.
- Aside from announcing a new CEO, the annual results Bayer reported on Tuesday was the second major story.
- But not only the chart is improving but Bayer also reported solid fiscal 2021 results at the beginning of March 2022.
Sales declined 13.8% year-over-year from €12,819 million in Q2/22 to €11,044 million in Q2/23. And although currency tailwinds had a negative impact, FX- and portfolio-adjusted sales declined 8.2% year-over-year. Currently, 24 S&P global analysts value Bayer at a target of €61/share, which gives us a 21% undervaluation. This is already best biotech stocks to buy now lower than the price target 1 year ago, and in this company, we have clear times when analysts have been either spot-on or have even undervalued and under-targeted this company. Germany is probably not the most interesting market when talking about new technologies or artificial intelligence and clearly lagging in these sectors.
The financial health and growth prospects of BAYRY, demonstrate its potential to outperform the market. One of the major news stories in the last few weeks was the retirement of CEO Werner Baumann. And although Baumann’s performance was not great – at least when measured by looking at the stock price – I don’t know if the criticism he had to endure was justified. Of course, under Baumann Monsanto was acquired which led to the declining stock price, caused a series of multi-billion-dollar litigations against Bayer (which are still not resolved) and damaged the reputation of Bayer a bit.
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When using portfolio and FX adjusted numbers, the growth would even have been 12.9% YoY. And Bayer also should have growth potential as the three business segments address huge markets. Especially in the Crop Sciences, with a TAM of €100 billion, Bayer is clear market leader and should be able to use its dominant position in the years to come and maybe be able to gain market shares.
For 2022, I assume a similar free cash flow as in 2019 and until 2024 free cash flow will increase to €5 billion (company’s mid-term targets). For the years after 2024, we assume 5% growth till perpetuity, which seems realistic for a company that is profiting from several megatrends and has an economic moat around its business. Aside from announcing a new CEO, the annual results Bayer reported on Tuesday was the second major story. In fiscal 2022, Bayer generated €50,739 million in sales and compared to €44,081 million in fiscal 2021 this resulted in 15.1% year-over-year growth (with organic sales growth still being 8.7%). Finally, free cash flow also improved from €1,415 million in fiscal 2021 to €3,111 million in fiscal 2022. I still remain confident that Bayer is undervalued at this point, and with the litigation issue resolved and the final settlement payments of €8 billion paid in 2021, several reasons to be bearish are off the table.
And when looking at Bayer’s statement of financial positions (the balance sheet) on June 30, 2023, we see total assets as well as equity attributable to Bayer AG shareholders declining over the last few quarters – which is not a good sign. While Bayer has €36,557 million in non-current financial liabilities, the company also has €9,960 million in current financial liabilities. And in my opinion, management is quite optimistic when it assumes to repay about €10 billion in debt in the next 12 months. Of course, the company has €4,481 million in cash and cash equivalents on its balance sheet it can use to reduce debt levels.
A forecast for Bayer stock
In 2023, patent losses will only occur in Canada (responsible for 4% of sales) and Australia, but in 2024 and 2025 Bayer will lose patents in key markets probably leading to steeply declining sales. Sales for the pharmaceutical segment increased with a solid pace from €18,349 million in fiscal 2021 to €19,252 million in fiscal 2022 – an increase of 4.9% year-over-year. EBITDA before special items also increased slightly (1.6% year-over-year) from €5,779 million in the previous year to €5,873 million in fiscal 2022. Growth was especially driven by Eylea growing 9% with all regions contributing to growth, however it was offset by Xarelto declining due to pricing pressures in the UK and loss of exclusivity in Brazil.
And even when calculating with rather moderate assumptions (only 4% growth), I see at least 40% upside for the stock. Growth rates fluctuated heavy in the last decades and when looking at the 10-year EPS CAGR, we see numbers as high as 24% in the 1990s or almost 18% in 2014. When looking at a long-term average, we get a CAGR of 4.46% for earnings per share between 1980 and 2019, which seems to be in line with management’s growth expectations for the years to come. Whenever something is cheap such as this, and when we’re talking about a historically powerful company such as Bayer, my stance is that it’s only a matter of time until we see a reversal to more standard levels of valuation. By simply following these trends, investors can generate returns well above those of the overall market – and it’s not really that advanced in any way – it just requires patience and perseverance. The ability to clearly stick to your own opinion that “this is worth more than the market is currently valuing it”.
With their already struggling Monsanto acquisition (the Bayer Crop Science Division), minimized demand for biofuel has made their progress weak. Bayer has admitted to some agricultural shortcomings with their Monsanto takeover, causing stocks to fall. They speak out on Bayer and other 500 companies……Our annual ranking of the world’s largest corporations. Past 10 year’s financial track record analysis by Moneyworks4me indicates that Bayer CropScience Ltd is a good quality company. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Bayer Expected to Swing to 3Q Profit; Crop Science Recovery in Focus — Earnings Preview
When looking at the pharmaceutical segment, the biggest part of revenue is still stemming from Xarelto, which generated €1,164 million in sales (reflecting 10.1% growth YoY). But Bayer – together with Johnson & Johnson (JNJ) – will lose patent protection in 2024, which could lead to steep sales declines. The second most important product for Bayer’s pharmaceutical best pairs to trade forex segment is Eylea, which generated €711 million in sales (25.2% growth YoY). Sales are estimated to be stable in the years to come and might even increase. But Eylea will lose exclusivity between 2020 and 2025 in key markets, which will lead to declining sales although management is expecting moderate generalization dynamics as it is a biological product.
What is Bayer stock price today?
In my opinion, Bayer remains undervalued, and I remain confident that Bayer will return on its path of growth although the debt levels should be carefully monitored. And Bayer – under the new CEO – should try to become the Trading index boring but well-run and well-performing business again it was before 2015. A more realistic assumption would be to assume €0 free cash flow in 2023 but again €5 billion in fiscal 2024 and 5% growth for the following years.
Growth Potential
When using the core earnings per share of fiscal 2020, Bayer is trading for 8.3 times earnings, and when using the guidance for fiscal 2021, we get a P/E ratio around 8.5. And for almost any company – especially companies that should be able to grow in the years to come – this is a very cheap valuation. When looking at the expected core earnings per share for fiscal 2021 (midpoint of guidance is €6.50), we get a P/E ratio of 7.3, which seems extremely cheap. And despite the legal challenges – a valuation multiple in the single digits for a company that has an economic moat around its business seems very cheap. And as Bayer recently disappointed again with its second quarter results, I will look at the positive and negative aspects once again. When summing up, Bayer is expecting pharma sales to increase between 3% and 5% in the next years until 2023.
But not only the chart is improving but Bayer also reported solid fiscal 2021 results at the beginning of March 2022. Sales increased from €41,400 million to €44,081 million – this resulted in a solid 6.5% year-over-year growth (FX and price adjusted sales increased even 8.9% YoY). Consumer health posted a strong sales increase – 11% YoY – despite a very strong comparison quarter. There was a high demand in Nutritionals, rising 20% YoY, and Pain/Cardio saw encouraging growth of 17.4% YoY.