Eckert & Ziegler Group is one of the world’s largest providers of isotope technology for medical, scientific and industrial use. The core businesses of the Group are cancer therapy, industrial radiometry and nuclear-medical imaging. The two business segments are: Medical and Isotope Products. The company was founded 1997 but history goes until former GDR research institute. Founder Dr. Eckert is still actively involved in the company as CEO and major shareholder (holding more than 30%). The company grew organically and with M&As over the years.

Revenue per share grew from € 6.02 in 2014 to € 8.55 in 2020. Earnings (€ 0.32 to 1.11) and dividends (from € 0.15 to 0.45) grew even faster over the same period indicating an improvement in profitability, that the company can scale on its products and is generating shareholder value while growing.

Revenue by region

The company is expanding globally but the US market experienced a slow down during COVID year 2020.

By looking at the H1 2021 report we can see that the company grew enormously and increased their full year forecast by 20%. They are expecting to deliver an EPS of € 1.70 for 2021. Given that the company tends to be conservative I wouldn’t be surprised if they beat this again. When I use an EPS of € 1.70 in my financial model with a 10% discount rate and a terminal multiple of 20 then I get an estimated fair value per share of € 84.40. This means that the company is overvalued by 47% based on my assumptions at a price of € 124. I think the current share price is reflecting an annual growth of 30% over the next 5 years which is not impossible but very optimistic considering many unknowns are along the way. The company managed to grow EPS by almost 25% annually over the last 8 years but from a lower level and at a certain size it can become more difficult to keep growing with the same pace.

Positives:	Strong growth and potential strong growth ahead.
	Scale effects with stronger earnings growth vs. revenue.
	High ROIC.
	Solid financials with good cash positions (net cash).
	Owner led company where major shareholder is CEO.
	Great compounder by annual earnings growth rate of 20%.
	Bigger market cap allows more institutional investors to take a stake.
	Market leader in their industry.
Negatives/Risks:	Significantly overvalued.
	Some upcoming products still require final approval.
	First insider sales since 2019.
	Revenue is growing less than 10 % while earnings grew 20+% annually. At some stage there will be a limit for margin growth.

Conclusion

It’s an excellent and very well managed company which generated enourmous shareholder value over the last years. Many promossing products are in the pipeline which should drive revenue and profits further. There are almost no negatives/risk apart from the lofty valuation. If my focus would be buy and hold forever then this would be one of the quality companies I would keep in my portfolio. However given the valuation I reduced my position by 2/3. I might consider completely closing it if it goes up further or if if the share prices approaches my estimated fair value then I might re-instate my position. It was a very difficult decision to sell such a high quality business.

Analyst reports on the companies homepage: https://www.ezag.com/home/investors/analyst_reports/