Monday, October 7, 2013

Analysis of Deutsche Post



A German logistics and mail company


Company: Deutsche Post

Business: A German global mail and logistics company: They are divided into four divisions: Mail, Express, Global forwarding (freight) and Supply chain.

Active: They are active world wide and are present (at least with outgoing mails) to 220 countries. a bigger surprise is that they employ 475,000 people world wide which means that they are one of the 10th biggest employer in the world which is impressive!

P/E: 17.7

contrarian values of P/E, P/B, ROE as well as dividend
The P/E is Deutsche Post is as you all know by know not to my liking since it is 17.7 and the P/B is not much better since it is up at 2.5. This means that Graham would have had no interest at all in this company at the moment. Their earnings to sales are also not something to brag with since it is only 3% but the ROE is almost acceptable with close to 14%. The ratio of the book to debt is at 0.5 which is so, so. If we take a closer look at the growth in the last five years then that has been 0.4% which is awful! I would expect much more especially due to the presence of Amazon in Germany and many other online companies Zalando etc. all of them use DHL for shipping so they should have been able to grow with these3 companies which they have not. Therefore I have to put the motivated P/E something in between what they should accomplish and what they have and then I would maximum say a P/E of 15 to 18 which means that Deutsche Post is today fairly valued but that valuation is based on a feasible dream and not reality! They pay 2.9% in dividends so ok but not more and that represents 51% of their earnings so it is ok.

Conclusion: Neither me or Graham sees any interest in investing in Deutsche Post today. I am sure they do a good job and in my company I use them all the time because all other options are more expensive but are they doing a good job? It is acceptable which is represented in their share value but that also means that there is no interest to invest in them.

If this analysis is outdated then you can request a new one.

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