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GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

Financial Strength : 6/10

vs
industry
vs
history
Cash to Debt 1.29
SAFRY's Cash to Debt is ranked higher than
83% of the 265 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 0.70 vs. SAFRY: 1.29 )
SAFRY' s 10-Year Cash to Debt Range
Min: 0.67   Max: No Debt
Current: 1.29

Equity to Asset 0.28
SAFRY's Equity to Asset is ranked higher than
62% of the 266 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 0.40 vs. SAFRY: 0.28 )
SAFRY' s 10-Year Equity to Asset Range
Min: 0.23   Max: 0.42
Current: 0.28

0.23
0.42
F-Score: 5
Z-Score: 1.68
GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth : 7/10

vs
industry
vs
history
Operating margin (%) 10.21
SAFRY's Operating margin (%) is ranked higher than
86% of the 265 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 7.51 vs. SAFRY: 10.21 )
SAFRY' s 10-Year Operating margin (%) Range
Min: -4.22   Max: 10.21
Current: 10.21

-4.22
10.21
Net-margin (%) 9.57
SAFRY's Net-margin (%) is ranked higher than
90% of the 265 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 5.24 vs. SAFRY: 9.57 )
SAFRY' s 10-Year Net-margin (%) Range
Min: -3.47   Max: 9.57
Current: 9.57

-3.47
9.57
ROE (%) 20.34
SAFRY's ROE (%) is ranked higher than
94% of the 258 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 11.19 vs. SAFRY: 20.34 )
SAFRY' s 10-Year ROE (%) Range
Min: -6.71   Max: 20.91
Current: 20.34

-6.71
20.91
ROA (%) 5.78
SAFRY's ROA (%) is ranked higher than
85% of the 265 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 4.19 vs. SAFRY: 5.78 )
SAFRY' s 10-Year ROA (%) Range
Min: -1.94   Max: 5.78
Current: 5.78

-1.94
5.78
ROC (Joel Greenblatt) (%) 54.01
SAFRY's ROC (Joel Greenblatt) (%) is ranked higher than
94% of the 265 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 22.05 vs. SAFRY: 54.01 )
SAFRY' s 10-Year ROC (Joel Greenblatt) (%) Range
Min: -4.78   Max: 54.01
Current: 54.01

-4.78
54.01
Revenue Growth (%) 10.00
SAFRY's Revenue Growth (%) is ranked higher than
86% of the 256 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 5.20 vs. SAFRY: 10.00 )
SAFRY' s 10-Year Revenue Growth (%) Range
Min: -0.3   Max: 10
Current: 10

-0.3
10
EBITDA Growth (%) 25.10
SAFRY's EBITDA Growth (%) is ranked higher than
93% of the 227 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 6.40 vs. SAFRY: 25.10 )
SAFRY' s 10-Year EBITDA Growth (%) Range
Min: 5.9   Max: 26.7
Current: 25.1

5.9
26.7
EPS Growth (%) 79.60
SAFRY's EPS Growth (%) is ranked higher than
96% of the 215 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 6.80 vs. SAFRY: 79.60 )
SAFRY' s 10-Year EPS Growth (%) Range
Min: -27.9   Max: 196.2
Current: 79.6

-27.9
196.2
» SAFRY's 10-Y Financials

Financials


Revenue & Net Income
Cash & Debt
Oprt. Cash Flow & Free Cash Flow

» Details

Guru Trades

Q3 2013

SAFRY Guru Trades in Q3 2013

Ken Fisher 44,224 sh (New)
» More
Q4 2013

SAFRY Guru Trades in Q4 2013

Ken Fisher 296,638 sh (+570.76%)
» More
Q1 2014

SAFRY Guru Trades in Q1 2014

Ken Fisher 277,855 sh (-6.33%)
» More
Q2 2014

SAFRY Guru Trades in Q2 2014

Ken Fisher 285,245 sh (+2.66%)
» More
» Details

Insider Trades

Latest Guru Trades with SAFRY

(List those with share number changes of more than 20%, or impact to portfolio more than 0.1%)

GuruDate Trades Impact to Portfolio Price Range * (?) Current Price Change from Average Current Shares
PRIMECAP Management 2012-09-30 New Buy0.01%$32.1 - $36.95 $ 16.27-54%142000
Premium More recent guru trades are included for Premium Members only!!
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Guru Investment Theses on Safran SA

Tweedy, Browne Comments on Safran - Nov 29, 2012

The first is a French aerospace company called Safran (SAFRY) that derives the majority of its earnings and value from its civil jet engine business. At our initial purchase price, we believed we were paying approximately 9 x 2012 Earnings Before Interest and Taxes and Amortization (EBITA), and a much lower multiple of prospective 2013 and 2014 EBITA.

The civil jet engine industry is an oligopolistic industry with large barriers to entry, stable market shares, and long product cycles. The engine that comprises the majority of Safran's engine business is called the CFM56, which is produced through a 50/50 joint venture with General Electric called CFMI. The CFM56 is the dominant engine on narrow body aircraft where it has a 100% share on the Boeing 737 and a 50% share on the A320 where it competes against a consortium controlled by Pratt & Whitney called IAE. Both the Airbus A320 and 737 have substantial backlogs and deliveries should grow nicely over the next several years. Moreover, CFMI (Safran) has secured its status as the sole supplier on the new version of the 737 (737 Max) and as a dual supplier on the new version of the A320 (A320 Neo), which ensures that CFMI will retain its dominant share on narrow body planes well into the 2020s.

The jet engine business model is a "razor/razor blade" business. Jet engines are sold around cost, but the real money is made on high margin (60%) spare parts, which are effectively captive to the original equipment manaufacturer (OEM), giving Safran substantial pricing power. Generic (PMA) parts represent approximately 3% of the market and have struggled to gain share for a variety of reasons, including: an expensive and time consuming certification process; leasing companies' preference for OEM parts which better preserve residual aircraft values; airline concerns related to the reputational risks associated with the failure of an engine equipped with PMA parts; and the increasing penetration of "power by the hour" contracts, whereby the OEM also performs the overhaul work. As such, once an engine is sold, it is very likely guaranteed to generate a long-term stream of spare parts revenue for the OEM. Each engine will have to visit the shop for an overhaul 3 to 5 times over its life and while there is uncertainty regarding the exact timing of the visit there is strong visibility and stability over multi-year periods.

Our research suggests that spare parts revenue for the CFM56 will experience significant growth over the next 3 to 5 years driven by an increase in shop visits, price increases, mix shift benefits, and a catch-up from deferred maintenance.

Shop visits – On average the current generation of engines stay on the wing for approximately eight to nine years before coming into the shop for an overhaul. This means that current shop visits are being driven in large part by deliveries in 2004 and 1996, which were both trough years for CFM56 deliveries. However, from 1996 to 2000 and 2004 to 2008 engine deliveries grew by more than 100% and 70%, respectively, which should drive an increase in shop visits over the next 3 to 5 years. It is also worth mentioning that as of December 2011, approximately 9,500 of the roughly 18,000 engines in the active fleet had never been to the shop.

Price and Mix – Our research indicates that OEMs are able to raise prices on most spare parts by approximately 5% per annum. Moreover, there is an ongoing mix shift from first generation engine shop visits to second generation engine shop visits, which generate significantly higher revenue per shop visit. We estimate that by 2015, second generation engines will account for approximately 66% of all shop visits as compared to 52% in 2011.

Deferred maintenance – During industry downturns airlines defer maintenance and reduce the scope of shop visits to preserve cash. Historically this has resulted in very steep recoveries in spare parts revenue when the cycle turns. Discussions with industry participants suggest that the airlines are pushing up against the limits of these deferral strategies and at some point these strategies will result in a substantial catch-up.

We don't believe the positive aspects of the civil jet engine business are reflected in Safran's current valuation. Given the quality of the business, the stability of the industry, as well as strong growth prospects for the aftermarket, we think Safran is conservatively worth 12 to 13 x forward EBITA. It is also encouraging that comparable transactions have occurred at significantly higher multiples. In October of 2011, Pratt & Whitney purchased Rolls Royce's 32.5% share of IAE (the only competitor to CFMI in the narrow body space) at an estimated high teens multiple of operating income bringing Pratt's total ownership of IAE to 65%.While we have never used a high teens comparable to value a prospective investment, always preferring to use more conservative multiples, we were delighted to see that a very high price had been paid by a knowledgeable acquirer for a business directly comparable to Safran.

From Tweedy Browne's Investment Advisor's Letter and Semi-Annual Report.

Check out Tweedy Browne latest stock trades

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Ratios

vs
industry
vs
history
P/E(ttm) 14.90
SAFRY's P/E(ttm) is ranked higher than
84% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 20.80 vs. SAFRY: 14.90 )
SAFRY' s 10-Year P/E(ttm) Range
Min: 3.3   Max: 974
Current: 14.9

3.3
974
P/B 3.00
SAFRY's P/B is ranked higher than
60% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 2.70 vs. SAFRY: 3.00 )
SAFRY' s 10-Year P/B Range
Min: 0.41   Max: 3.33
Current: 3

0.41
3.33
P/S 1.40
SAFRY's P/S is ranked higher than
60% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 1.20 vs. SAFRY: 1.40 )
SAFRY' s 10-Year P/S Range
Min: 0.14   Max: 1.56
Current: 1.4

0.14
1.56
PFCF 29.10
SAFRY's PFCF is ranked higher than
71% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 45.86 vs. SAFRY: 29.10 )
SAFRY' s 10-Year PFCF Range
Min: 1.63   Max: 111.75
Current: 29.1

1.63
111.75
EV-to-EBIT 13.37
SAFRY's EV-to-EBIT is ranked higher than
88% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 16.36 vs. SAFRY: 13.37 )
SAFRY' s 10-Year EV-to-EBIT Range
Min: 0.3   Max: 1102.1
Current: 13.37

0.3
1102.1
PEG 1.06
SAFRY's PEG is ranked higher than
92% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 5.41 vs. SAFRY: 1.06 )
SAFRY' s 10-Year PEG Range
Min: 0.89   Max: 1.4
Current: 1.06

0.89
1.4
Shiller P/E 36.50
SAFRY's Shiller P/E is ranked higher than
60% of the 277 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 24.25 vs. SAFRY: 36.50 )
SAFRY' s 10-Year Shiller P/E Range
Min: 32.29   Max: 104.97
Current: 36.5

32.29
104.97

Dividend & Buy Back

vs
industry
vs
history
Dividend Yield 1.60
SAFRY's Dividend Yield is ranked higher than
66% of the 189 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 1.84 vs. SAFRY: 1.60 )
SAFRY' s 10-Year Dividend Yield Range
Min: 0.69   Max: 6.86
Current: 1.6

0.69
6.86
Dividend Payout 0.05
SAFRY's Dividend Payout is ranked higher than
99% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 0.55 vs. SAFRY: 0.05 )
SAFRY' s 10-Year Dividend Payout Range
Min: 0.22   Max: 0.75
Current: 0.05

0.22
0.75
Dividend growth (3y) 43.80
SAFRY's Dividend growth (3y) is ranked higher than
96% of the 161 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 10.70 vs. SAFRY: 43.80 )
SAFRY' s 10-Year Dividend growth (3y) Range
Min: 0   Max: 58.7
Current: 43.8

0
58.7
Yield on cost (5-Year) 14.22
SAFRY's Yield on cost (5-Year) is ranked higher than
97% of the 196 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 2.24 vs. SAFRY: 14.22 )
SAFRY' s 10-Year Yield on cost (5-Year) Range
Min: 6.13   Max: 60.98
Current: 14.22

6.13
60.98
Share Buyback Rate -1.10
SAFRY's Share Buyback Rate is ranked higher than
73% of the 204 Companies
in the Global Aerospace & Defense industry.

( Industry Median: -0.60 vs. SAFRY: -1.10 )
SAFRY' s 10-Year Share Buyback Rate Range
Min: 0.6   Max: -32.9
Current: -1.1

Valuation & Return

vs
industry
vs
history
Price/DCF (Projected) 0.40
SAFRY's Price/DCF (Projected) is ranked higher than
83% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 1.75 vs. SAFRY: 0.40 )
SAFRY' s 10-Year Price/DCF (Projected) Range
Min: 0.55   Max: 1.58
Current: 0.4

0.55
1.58
Price/Median PS Value 0.40
SAFRY's Price/Median PS Value is ranked higher than
61% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 1.19 vs. SAFRY: 0.40 )
SAFRY' s 10-Year Price/Median PS Value Range
Min: 0.48   Max: 1.79
Current: 0.4

0.48
1.79
Price/Peter Lynch Fair Value 0.30
SAFRY's Price/Peter Lynch Fair Value is ranked higher than
93% of the 278 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 9999.00 vs. SAFRY: 0.30 )
SAFRY' s 10-Year Price/Peter Lynch Fair Value Range
Min: 0.9   Max: 2.43
Current: 0.3

0.9
2.43
Earnings Yield (Greenblatt) 7.50
SAFRY's Earnings Yield (Greenblatt) is ranked higher than
83% of the 247 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 6.60 vs. SAFRY: 7.50 )
SAFRY' s 10-Year Earnings Yield (Greenblatt) Range
Min: 0.1   Max: 329.8
Current: 7.5

0.1
329.8
Forward Rate of Return (Yacktman) 18.42
SAFRY's Forward Rate of Return (Yacktman) is ranked higher than
88% of the 246 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 8.56 vs. SAFRY: 18.42 )
SAFRY' s 10-Year Forward Rate of Return (Yacktman) Range
Min: 6.1   Max: 26.8
Current: 18.42

6.1
26.8

Business Description

Industry: Aerospace & Defense » Aerospace & Defense
Compare: » details
Traded in other countries:0IU8.country, SAF.France, SEJ1.Germany
Safran SA's core businesses are aerospace, defence and security, manufacturing engines and equipment for air and space, defence electronics and security solutions. It has operations in Europe, the Americas, Africa and the Asia-Pacific region.

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