Sunday, April 26, 2015

Analysis of Continental 2015


Continental, a German automotive supplier

Company: Continental

ISIN DE0005439004 | WKN 543900 

Business: A German automotive supplier. They are still divided into two groups: The Automotive group and the Rubber group. Under these two groups there are five divisions: Chassis and safety, Powertrain, Interior, Tires and ContiTech. These five divisions produce brake systems, systems and components for powertrains and chassis, instrumentation, vehicle electronics, tires and technical elastomers.

Active: In 53 countries world wide.

P/E: 18.7

Here you can find the previous analysis of Continental 2014

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

The P/E of Continental is far too high for me with 18.7 and the P/B is also a bit on the high side with 4.2 which gives a no go from Graham. Their earnings to sales are at 7% which I find reasonable and the ROE is excellent with 22.3%! The book to debt ratio of 0.6 I find to be a bit too low.
In the last five years they have had an excellent yearly revenue growth of 5.8%! This then gives us a motivated P/E of 16 to 20 which means that Continental is today fairly valued by the market.
The spend a large portion on research since it correspond to 90% of their earnings and this I find to be too high.
They pay a tiny dividend in the size of 1.5% which on the good side only represents 27% of their earnings so hopefully there will be no need to decrease it.

Conclusion: Graham says no to Continental and I watch in amazement due to that the share price have since the last analysis increased with over 30% and as long as they keep improving their earnings then why should that change? I still find it too expensive and I will not jump in but in the future I will follow Continental more closely. Another crash like in October 2014 (was down to around 140 € per share) then I would not mind to step in as a shareholder.

If this analysis is outdated then you can request a new one.

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