GRFS - Grifols: Why To Watch From The Sidelines

2024-05-07 05:10:21 ET

Summary

• Grifols, a major player in global plasma extraction and processing, has experienced a significant 43% decline in stock price in 2024 following a bearish report from Gotham.
• KPMG and the Spanish regulator have offered a more favorable perspective based on Grifols’ 2023 results, suggesting that while the company’s structure warrants caution, it is not without value.
• For investors seeking value, the question is: Is there enough margin of safety? A closer examination reveals that Grifols is facing several challenges compared to its competitors, compounded by debt.

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Grifols, S.A. ( GRFS ) is a Spanish multinational company specializing in the production and commercialization of pharmaceutical products derived from blood plasma. Founded in 1940 in Barcelona, Grifols has become one of the leading global players in the field of transfusion medicine and therapies based on plasma proteins.

Since 2010, the company has undergone significant transformation through acquisitions and growth investments. These efforts are mainly aimed at diversifying its business into diagnostics and expanding the network of plasma collection centers and its fractionation capacity. However, this aggressive growth has led to a fivefold increase in the company’s net financial debt over the past 10 years, while its earnings before interest, taxes, depreciation, and amortization (EBITDA) had barely grown by 28%. The COVID-19 pandemic further exacerbated the constant profit margin deterioration, which interrupted plasma collection....

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