Friday, May 30, 2014

Analysis of Deutsche Telekom 2014


A German telecom company


Company: Deutsche Telekom

Business: A German telecom company. It is divided into three groups: Consumer (Fixed, Mobile & Broadband, Cloud Services, Television), Business Customers (Information, Communication & Technology Solutions, Outsourcing & Cloud Services etc.) and finally Partner Services & Platforms (Partner for infrastructure access and network services, Platform & Cooperation projects).

Active: Still present in around 50 countries world wide but mainly in Europe.

P/E: 58.9 (even P/E is running at a negative value)


Here you can find the previous analysis of Deutsche Telekom.

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of Deutsche Telekom is horrible with 58.9 but the P/B is a little bit better yet to high with 1.7 which gives us a negative response from Graham. The earnings to sales is as low as 2% which is bad and the ROE is horrible with 2.9%. The book to debt ratio is also pretty low with 0.4. In the last six years they have managed to accomplish a negative yearly growth of -0.4% which gives Deutsche Telekom a motivated P/E of around 8 which means that they are highly overvalued by the market today. They still pay a very nice dividend of 4.1% (they decreased it from 0.7 € per share to 0.5 € per share) but this on the other hand represents 240% of their earnings so they better start increasing those earnings soon! Their debt jumped up by almost 10 billion from last year and they sold 130 million shares so I guess that answers a bit how they are financing their crazy dividend payments.

Conclusion: Neither Graham nor I would even touch this one with tweezers. The P/E is too high, the ROE is bad, the debt is high and the dividend they are paying is far too high in comparison to what they should be paying and I do not like when a company takes on debt to pay out dividends.

If this analysis is outdated then you can request a new one.

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