Villeroy & Boch (VIB3) is a German manufacturer of ceramics. The company has been in business since the mid-1700s and has very high profit margins and has shown nice growth. The stock is a holding of Tweedy Browne (Trades, Portfolio).
The company has 14.04 million shares, it's stock trades for 19.58 euros ($22.46), and the market cap is 274.9 million euros. Earnings per share are 1.11 euros, and the stock trades at a price-earnings (P/E) ratio of 17.44. The dividend is 0.53 euros, and the dividend yield is 2.7%.
According to the Financial Times, the profit margin is 3.57%, and the operating margins are 5.85%. Return on equity is 17.48%. Earnings per share have grown at 9.74% over the last five years. That's pretty good profitablity and growth!
Sales grew from 766 million euros in 2014 to 820 million euros in 2016. That's good top-line growth! Free cash flow was 52 million euros last year, and the free cash flow yield is 18.9%. Wow! Free cash flow was exceptionally high last year and is usually much lower.
The balance sheet shows 111 million euros in cash and 129 million euros in receivables. The liability side shows 77 million euros in payables and 50 million euros in debt. Doesn't get much stronger than this balance sheet.
Villeroy manufacturers ceramics under the brand names Alfoldi, Bellevue, Gustavsberg, Gallo Design, Nahm Sanitaryware, Mondial, Vatette, Sanipa, vivo and Vitromex. As you may guess from the names, these brands represent plants in different countries from South America to Europe. The brands focus on dining and bathroom ceramics such as tea cups and soap dishes. The stock was at 6.63 euros five years ago so you can see it's grown nicely and has paid a dividend along the way.
Unfortunately, there is a dual-share structure. The founding family holds a different class of shares. This is common in Germany but very annoying to shareholders. The stock does not trade in the U.S. so you will have to get your broker to buy in Europe if you are interested. I found the stock by looking at Tweedy Browne's holdings on GuruFocus.
You can see what Tweedy Browne is doing: investing in building by buying the high margin, low debt. It's kind of like selling shovels and pick axes to miners.
Many of its products are high end: heated toilet seats and bath tubs for yachts. I imagine that the stock would pull back in a tough economy. Also, it would certainly pull back when home building slows. Home builders have done well with the dearth of inventory, but that won't last forever.
With profit margins like this, it's a stock to follow with a pullback in housing or Germany.
Disclosure: We do not own shares.
