Sunday, April 24, 2016

Analysis of Deutsche Telekom 2016


Deutsche Telekom, a German telecom compan


ISIN DE0005557508 | WKN 555750 

Business: A German telecom company. They are still working according to their 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: 21.9


Here you can find the previous analysis of Deutsche Telekom 2015

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

The P/E for Deutsche Telekom is far too high with 21.9 and even though the P/B is good with 1.9 we still end up with a no go from Graham. The earnings to sales are down at 5% which I find ok but the ROE is down at 8.5 which I do not find good. The book to debt ratio is down at 0.4 which I find to be low.
In the last five years they have had a good yearly revenue growth rate of 3.4% which gives a motivated P/E of 12 to 15 which means that Deutsche Telekom is today overvalued by the market.
They pay a very nice dividend in the size of 3.6% which unfortunately correspond to almost 80% of their earnings! They seriously need to push up their earnings,

Conclusion: Graham says no to Deutsche Telekom and so do I. The only good values are the P/B and the dividend but that is not enough and especially not when they are already paying out so much of their earnings in dividends! These old telecom companies can many times be little piggy banks but with Deutsche Telekom being traded at almost 22 times their earnings that becomes highly uninteresting with the additional consideration that one gets such a low dividend paid out in comparison to what one can get elsewhere.

If this analysis is outdated then you can request a new one.

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