An overview of this attractive Finnish company can be found here - from the horse's mouth, so to speak, so DYOR(!): https://www.kone.com/en/investors/kone- ... t-in-kone/
The company has recurring revenues; a strong position in the market; and is benefiting from an expanding installed unit base of elevators/escalators with growing service revenues on top of that.
At its recent peak, the share price is up 88.5 percent in sterling terms (the vast majority from share price appreciation in its listed currency, however Sterling has weakened somewhat and given a slight boost). I have also received about 8.2 percent of my capital investment back in dividends, paid every March, meaning that every £1 I invested has almost doubled (counting both capital appreciation and cash dividends, 96.7 percent).
On a net basis, my dividend yield on cost is 2.8 percent and the dividend growth over three years has been a 0.3 percent CAGR. I suspect this will go slightly negative next year as Finland is raising their dividend tax from 30 to 35 percent, which will probably offset any dividend growth.
![Sad :(](./images/smilies/icon_e_sad.gif)
The average return on capital employed has been 35 percent from 2014 to 2019, while the operating margin averaged 13.2 percent and is expected to expand in the next few years after recent weakness.
I am frankly astonished that the company has re-rated so much. I purchased in 2017 at a p/e ratio in the low 20s, however now the p/e is just over 40. I expect the company to grow steadily and moderately over time but the near-doubling of my investment in 3.5 years is largely due to the market's valuation of the company surging rather than the cashflows being generated.
Pre-tax profit has not grown from 2017 to 2019 (it dipped in 2018 and is recovering). The 2022 forecasts represent 18 percent growth compared to 2017. Looking at the figures for 2020 to 2022, the current free cashflow yield is estimated at 2.7 percent and rising to 3.2 percent by 2022. It is a solid company and I am not selling, however I am acutely aware 'Mr. Market' might mark Kone down again! On the basis of business performance, you might expect the share price to rise by 20 percent from 2017-22 and then enjoy perhaps 14 percent from dividends on top, or a 34 percent total return.
It does seem that, for a number of companies, perceived safety and reliability is being rewarded with expanding valuation multiples, even if the growth is not there to support it in the short or medium term.
Thoughts?
Best wishes
Mark.