Are we at the bottom yet?
Grifols stock has been heavely punished during 2021.
First the pandemic difficulted the plasma collection. We must take into account the stimulus checks and the unemployment benefits from the US goverment wich might have disuaded people from going to the plasma collection centers to get some extra income. I'll be looking forward for the data on the plasma operations in the next earnings release. We also have to consider the high net gearing of the company after issuing a ton of debt to purchase various companies wich will allow
GRF. GRF.to diversify their portfolio in the future and increase their "plasma economy" being able to extract more proteins and produce more drugs (and thus revenue) from each liter of plasma.
The real question is if Grifols is a good buy at 19-20 euros per share. It is important to consider that the company has announced that it will suspend its dividend until its debt is reduced, so this makes it a less attractive long term hold.
If we look at the chart we can see that we are really close to two important support levels at 20 eur and 19.5 eur that acted as resistance between 2016-2017. I consider that this might be a great entry point consdering the position of GRF in the plasma market, there aren't many competitors or substitutives to their products. The future of the stock and the shareholder value shall come from a change in the fundamentals once they get the possibility to reduce the collection cost of plasma (reducing how much they pay the donors) and thus they see and increase in their gross and net margins.
Another important aspect would be the reinstitution of its dividends but you don't sell the skin till you have caught the bear. It will take some time and it would require their operations to return to normal.
Overall i think that if you take all this factors into consideration the price between 19.5 and 20 euro can be a good entry if you want to bet on their earnings pointing towards a return to normal. If we get good guidance on Q3 earnigns i wouldn't be surprise to see the stock going above the 22 euro mark (a 10% return from where it is currently trading) and even getting close to 25 euro. I don't see GRF going back to their prepandemic levels any time soon but i think there might be some value on this price point if the situation of the company improves towards the next year. In an enviroment where there are concerns of inflation and stagnation a company with a stable stream of income and control over its prices can provide some defense for investors trying to preserve value.
First the pandemic difficulted the plasma collection. We must take into account the stimulus checks and the unemployment benefits from the US goverment wich might have disuaded people from going to the plasma collection centers to get some extra income. I'll be looking forward for the data on the plasma operations in the next earnings release. We also have to consider the high net gearing of the company after issuing a ton of debt to purchase various companies wich will allow
GRF. GRF.to diversify their portfolio in the future and increase their "plasma economy" being able to extract more proteins and produce more drugs (and thus revenue) from each liter of plasma. The real question is if Grifols is a good buy at 19-20 euros per share. It is important to consider that the company has announced that it will suspend its dividend until its debt is reduced, so this makes it a less attractive long term hold.
If we look at the chart we can see that we are really close to two important support levels at 20 eur and 19.5 eur that acted as resistance between 2016-2017. I consider that this might be a great entry point consdering the position of GRF in the plasma market, there aren't many competitors or substitutives to their products. The future of the stock and the shareholder value shall come from a change in the fundamentals once they get the possibility to reduce the collection cost of plasma (reducing how much they pay the donors) and thus they see and increase in their gross and net margins.
Another important aspect would be the reinstitution of its dividends but you don't sell the skin till you have caught the bear. It will take some time and it would require their operations to return to normal.
Overall i think that if you take all this factors into consideration the price between 19.5 and 20 euro can be a good entry if you want to bet on their earnings pointing towards a return to normal. If we get good guidance on Q3 earnigns i wouldn't be surprise to see the stock going above the 22 euro mark (a 10% return from where it is currently trading) and even getting close to 25 euro. I don't see GRF going back to their prepandemic levels any time soon but i think there might be some value on this price point if the situation of the company improves towards the next year. In an enviroment where there are concerns of inflation and stagnation a company with a stable stream of income and control over its prices can provide some defense for investors trying to preserve value.
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