Monday, July 25, 2011

Cork company comparison

I hope not to bore readers with another post on Corticeira Amorim but I wanted to do a side by side comparison with a competitor, French company Oeneo.  Just as a side note I'm expecting to have a much longer post ready later this week for readers who are looking for a deeper company analysis.

As I posted here and here Corticeira Amorim produces cork products including wine cork stoppers, cork flooring, insulation, and other cork products.  While Corticeira is a hidden champion this doesn't mean that they have a monopoly on the cork market, one company they share the wine stopper market with is Oeneo.

A bit of background, Oeneo considers itself a wine products company with a division in the corking business, different than Corticeira who considers themselves a cork company.  Either way I think the comparison is fair.


I like doing comparisons like this and probably don't do them often enough but they highlight important differences.  The biggest item that stands out to me is that Oeneo has a 7.21% profit margin vs the 4.5% margin of Corticeira.  On the other hand Corticeira appears more undervalued with a lower P/E and lower P/B.

The question an investor needs to ask themselves before investing in corks or wine making is would they rather pay more for a company with higher margins or a less profitably company that is selling at a cheaper price?  Or to flip it around, does a 7.2% profit margin vs a 4.5% profit margin justify an almost double P/E?

Disclosure: Long Corticeira Amorim


3 comments:

  1. I'd take the value, on the basis that profit margins are probably mean reverting!

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  2. Richard,

    I would agree with you. I'm hoping for a double whammy, mean reversion in the margins and mean reversion in the valuation.

    Nate

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  3. hi Nate,

    it's not a cork company, but they sell their products to the wine and spirit industry.
    a french family-backed hidden champion: TFF

    have fun!

    Guillaume

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