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The Company is the industrial gases supplier in North and South America, is rapidly growing in Asia, and has strong, well-established businesses in Europe.
Strengths and Growth Prospects -Praxair Inc. is the largest industrial gases supplier in the world, supplying primarily atmospheric gases and related services to a multitude of end markets. -On-site tonnage comes with 10-20 year contracts set in place, which provides a reliable revenue stream-Praxair serves over 25 different end markets in various regions, with over 50% of their revenues from sources outside the U.S.-Gross margins holding at 40% over last 10 years-Return on assets rising over 10 year period from -Strong backlog and pricing power-High barriers of entry due to the importance of uniformity and reliability -Lowering overhead costs to (partially) offset economic slowdown-Diversified customers (e.g. industrial gases used in energy, electronics, chemicals, metals, manufacturing, healthcare, aerospace and food & beverage)-Strategic acquisitions boosting earnings-42 on-site production plants under construction (as of February 2009) -Operational efficiency caters to consumers’ demands-Dividend yield of 2% with 5-year dividend growth rate of 26%-PEG of 1.7 (compared to S&P 500 of 2)-New projects in South America, China, India and Korea -Acquired 15 packaged gases distributors in the U.S. and Canada. Scale matters a lot in the industrial gases industry and organic growth is not always the optimal strategy. -International exposure capable of driving strong growth in the future-Lion’s share of patents relating to technology for carbon capture and sequestration (CCS)-Praxair was one of only 12 companies that made the cut to participate in the government's $1.4 billion CCS race.Weaknesses and Potential Challenges-Possibly over-valued: P/E and P/B high (even though in line with historical valuation)-Profitability will struggle as long as economic woes persist-High debt with a long-term debt/equity ratio
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