Sika's Growth Slowed Significantly In Q4, Making Valuation More Of A Concern

I’ve said it before and I’ll probably have to keep saying it until I stop writing – valuation, in and of itself, doesn’t often move stocks. To that end, while I thought Sika (OTCPK:SXYAY) (SIK.S) was expensive back in July, I’m not surprised it’s held up reasonably well (more or less in line with BASF (OTCQX:BASFY) and Arkema (OTCPK:ARKAY), behind RPM (RPM), better than Saint Gobain (OTCPK:CODYY) and inline with the Swiss market). This is, after all, one of the best specialty chemical companies I know, and the company’s presentations at its October capital markets day made a strong case for exceptional performance for at least the next five years.

Sika’s fourth quarter revenue disappointed investors, but was in line with my expectations for the most part. I am concerned that 2020 could be a tougher year for non-residential construction (it will almost certainly be slower), but I’m not betting against Sika’s ability to continue to gain share through innovation while also driving higher margins. The problem is that that’s already in the share price, and I can’t really see how these shares offer above-average potential.

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Sika's Growth Slowed Significantly In Q4, Making Valuation More Of A Concern