Friday, 25 October 2013

Analysis of Siemens

A German electrical engineering and electrics company

Company: Siemens

Business: A German company active with electrical engineering as well as electrics. They are divided into four sectors: Energy, Healthcare, Industry and finally Infrastructure and Cities. The revenue is fairly well balanced between the sectors and so is usually also the profit besides from the Infrastructure that has been doing a little less good lately.

Active: They are present world wide by being active in 190 countries with over 290 production plants to keep their 370,000 employees active.

P/E: 18.2

contrarian values of P/E, P/B, ROE as well as dividend
The P/E for Siemens not so interesting for me since it is 18.2 and the P/B is also too high with 2.6 which leads to a clear rejection from Graham. The earnings to sales are at 6% which is ok for a gient like this and the ROE is also pretty ok with 14.5%. The book to debt could have been better since it is down to a ratio of 0.4. In the last five years they have had poor growth with only yearly 0.3% which is not even inflation which then also gives that the motivated P/E ends up around 8 to 10 which means that Siemens today is overvalued on the market. They spend plenty of money on research, I would even say too much since it is 95% of the earnings. They also pay a fully acceptable dividend of 3.3% which represents as much as 60% of the earnings so fairly high. If there would be problem I would guess that they could be forced to decrease the dividend.

Conclusion: A world wide well known German industrial company that I would one day love to own shares in but  that moment is not yet here. Today it is far too expensive for me for being of any interest to step in. The P/E and P/B is too high and I do not like that the dividend is already 60% of their earnings.

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