Monday 25 November 2013

Analysis of Deutsche Wohnen

A German residential and nursing home company

Company: Deutsche Wohnen

Business: A German residential company with the core business to develop and manage real property. A secondary business that they have is nursing homes. Almost 70% of their employees are active within that and it goes under the name of Katharinenhof.

Active: They are currently only active in Germany they have almost 90,000 residential units.

P/E: 16.6
contrarian values of P/E, P/B, ROE as well as dividend
The P/E is slightly too high for me with 16.6 and also the P/B is a bit too high with 1.5. Which then also according to Graham gives that it is just outside of being interest. Their earnings to sales are however great with 32% but the ROE is lower then what one would have hoped for with 9%. The book to debt for a real estate company is ok at 0.5. In the last five years they have had an excellent growth of yearly 7.3%! Which leads to a motivated P/E of 19 to 23 so based on their previous growth the market is today undervaluing Deutsche Wohnen. They pay a very tiny dividend of 1.5% which on the other hand only represents less than 25% of their earnings so room for improvement. Additional comment is that their quantity of shares has doubled in the last five years and in that same period they have had two negative years.

Conclusion: The P/E is too high, the P/B is too high, the ROE is too low and the dividend is just silly low so both Graham and I say that it is not currently a buy even though I got a little but more interested in the company when I saw that they also own nursing homes. Here can be found an old article that I wrote about the eldercare in Germany.

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