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Looking for a profitable fast-growing stock? Look at Frutarom Industries

30 Mar 2017 • About Frutarom Industries ($FRUT) • By InTwits

Frutarom Industries is a growth stock in Chemicals industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

Frutarom Industries showed growth in the last financial year. The company's revenue surged on 31.4% in FY2016. Together with revenue growth Frutarom Industries also managed to keep EBITDA growth. EBITDA grew 18.3% for the same period.

In the last 3 years Frutarom Industries showed fast revenue growth of 19.4% from 2013 to 2016 annually. EBITDA surged on 18.7% from 2013 to 2016 annually.

Frutarom Industries ($FRUT) financials for the last 5 years

mln. $ 2012 2013 2014 2015 2016
Revenue growth, %9.0%21.6%6.5%31.4%
Gross margin, %36.6%38.1%39.1%38.7%38.1%
SG&A, %22.9%22.8%22.5%21.2%21.8%
EBITDA growth, %15.8%30.6%8.1%18.3%
EBITDA margin, %16.0%17.0%18.2%18.5%16.7%
Net Income52638795109
Net Income margin, % 8.34%9.37%10.6%10.9%9.52%
CAPEX/Revenue, %2.03%2.99%2.61%2.74%2.48%
Net Debt/EBITDA1.4x1.7x1.1x2.6x2.2x
ROIC, %12.0%11.9%15.1%14.1%12.8%
ROE, %12.3%13.1%16.7%17.8%18.2%

Profitability and return on investment

EBITDA margin declined slightly from 18.5% in FY2015 to 16.7% in FY2016. In the longer period Frutarom Industries showed small EBITDA margin decline of 0.300 pp from 17% in 2013 to 16.7% in 2016.

We call Frutarom Industries an attractive growth stock as together with the growth it delivers high ROIC at 12.8%. During the last three years it increased - it was 11.9% in FY2013. For the last three years the average ROIC was 14.0%.

The company's Net Income margin dropped on 1.40 pp from 10.9% to 9.50% in 2016. In the longer period Net Income margin increased slightly on 0.100 pp from 9.40% in 2013 to 9.50% in 2016.

Frutarom Industries operates at ROE of 18.2%. It's average level of ROE for the last three years was 17.6%.

Capital expenditures (CAPEX)

The company's CAPEX/Revenue was 2.48% in FY2016. The company's CAPEX/Revenue dropped on 0.501 pp from 2.99% in 2013 to 2.48% in 2016. It's average level of CAPEX/Revenue for the last three years was 2.61%.

Leverage (Debt)

Having such a fast growth profile Frutarom Industries keeps medium debt level at 2.2x Net Debt/EBITDA. In the longer period the company's leverage surged on 0.53x from 1.67x in 2013 to 2.20x in 2016.

Valuation vs. comparable companies

At the end of trading day today Frutarom Industries traded at 2.4x EV/EBITDA which is 91.3% lower than 27.0x Chemicals peer group avearge calculated on the basis of 70 companies. The company trades at 0.3x P/E which is 97.8% lower than 12.2x Chemicals industry avearge calculated based on 4 companies.

Peers in Chemicals

Below we provide Frutarom Industries benchmarking against other companies in Chemicals industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Phosagro OJSC ($PHOR)4.8%-0.7%17.7%54.1%
Acron JSC ($AKRN)8.7%-4.5%9.9%42.1%
Plastics Capital ($PLA)-2.1%3.3%21.9%28.4%
Croda International ($50GP)2.4%-2.8%3.4%15.0%
Arab Potash Co ($APOD)-18.6%-11.1%2.7%-1.5%
Median (9 companies)6.7%-0.7%3.3%-1.5%2.2%
Frutarom Industries ($FRUT)9.0%21.6%6.5%31.4%

Top companies by Gross margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Uralkali PJSC ($URKA)71.6%74.3%81.8%75.9%
Phosagro OJSC ($PHOR)42.9%34.8%45.2%56.2%
Acron JSC ($AKRN)43.1%38.1%42.8%52.7%
Arab Potash Co ($APOD)51.3%35.2%26.2%40.5%
Halosource Inc ($HALO)32.9%40.7%44.8%40.2%
Median (9 companies)35.1%35.2%36.0%40.2%33.2%
Frutarom Industries ($FRUT)36.6%38.1%39.1%38.7%38.1%

Top companies by EBITDA margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Uralkali PJSC ($URKA)44.5%48.6%62.3%51.9%
Phosagro OJSC ($PHOR)32.9%22.9%30.5%43.5%
Arab Potash Co ($APOD)47.2%36.3%27.7%39.6%
Acron JSC ($AKRN)28.4%22.7%27.2%36.2%
Croda International ($50GP)27.2%27.6%26.7%27.7%26.7%
Median (9 companies)21.0%22.7%26.7%27.7%18.6%
Frutarom Industries ($FRUT)16.0%17.0%18.2%18.5%16.7%

Top companies by CAPEX/Revenue, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Phosagro OJSC ($PHOR)12.7%17.0%16.7%22.4%
Acron JSC ($AKRN)22.7%21.3%15.4%14.2%
Uralkali PJSC ($URKA)12.5%9.8%10.9%13.9%
Croda International ($50GP)4.8%4.1%6.0%8.6%8.3%
Basf Se ($BFA)5.6%6.6%7.1%8.2%7.2%
Median (9 companies)6.5%6.6%6.3%8.2%7.2%
Frutarom Industries ($FRUT)2.0%3.0%2.6%2.7%2.5%

Top companies by ROIC, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Phosagro OJSC ($PHOR)28.5%15.0%21.6%41.2%
Croda International ($50GP)46.5%42.3%35.3%30.5%27.7%
Uralkali PJSC ($URKA)13.2%23.1%14.1%
Acron JSC ($AKRN)14.4%9.2%10.6%17.9%
Arab Potash Co ($APOD)21.2%13.5%9.8%16.7%
Median (9 companies)14.9%12.8%10.6%16.7%13.0%
Frutarom Industries ($FRUT)12.0%11.9%15.1%14.1%12.8%

Top companies by Net Debt / EBITDA

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Uralkali PJSC ($URKA)2.8x1.8x2.8x4.7x
Plastics Capital ($PLA)2.1x1.9x1.4x2.2x2.3x
Acron JSC ($AKRN)1.6x2.4x2.8x1.4x
Phosagro OJSC ($PHOR)0.8x1.8x2.5x1.3x
Basf Se ($BFA)1.2x1.2x1.3x1.2x1.4x
Median (8 companies)0.8x1.5x1.3x1.2x1.4x
Frutarom Industries ($FRUT)1.4x1.7x1.1x2.6x2.2x