Sunday, May 3, 2015

Analysis of Deutsche Telekom 2015


Deutsche Telekom, a German telecom company


ISIN DE0005557508 | WKN 555750

Business: A German telecom company. They are now working in four operating segments: Germany (fixed network and mobile communications), Europe (fixed network and mobile communications), USA (mobile communications) and finally Systems Solutions (products for multinational business clients)

Active: 50 countries, heavy in Europe and Germany.

P/E: 25.8

Here you can find the previous analysis of Deutsche Telekom 2014

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

The P/E of Deutsche Telekom is too high with 25.8 but the P/B is more acceptable with 2.2. Still the answer from Graham is no. The earnings to sales I find to be ok with 5% but the ROE is bad with only 8.6%! The book to debt ratio is too low for my liking with 0.4.
They have hardly grown anything at all during the last five years in revenue since it is only 0.1% which then gives us a motivated P/E of 8 to 10 which means that Deutsche Telekom is highly overvalued today (especially if I consider that their "one-time earning", that still happens every year, was higher than normal).
They pay an ok dividend of 3% which however correspond to 78% of their earnings so they need to bring up the earnings to keep this up. On their homepage they claim that they will pay a minimum of 0.5 € per year in dividend and they expect to pay much higher dividends in the years to come. Somehow I doubt it will work out...

Conclusion: Graham says no and I say a big no, no to Deutsche Telekom. P/E is too high, ROE too low and the dividend that they pay I do not like the look of. 

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