Thursday, 6 June 2013

Analysis of Comdirect

A German online bank

Company: Comdirect

Business: Online banking. Providing bank accounts, credit cards, trading of stocks etc. etc. to over 7 million customers.

Active: Currently only active in Germany. It is more or less a daughter to Commerzbank since they own 80% of the stocks last time I checked.

P/E: 19.2

The reason why I took a look at this online bank was two-fold. The first time it was due to that I was interested in Commerzbank and the second time it was because I found that especially young people were using this bank due to that there are no charges either for the bank account or for the credit card and young people use anyway internet for paying all the bills so very rarely need to go to a physical location. This also means that their customer base is growning year by year.

 The running P/E is very high with its 19 and the P/B with its 1.8 then becomes far to high for being of interest according to Graham. The earnings to sale is excellent with 61% looking at a classical bank such as Deutsche bank they are around 10% and the mother company Commerzbank is currently far from any margins like that! The book to debt is also a little bit higher than the classical banks with its 5% still I find it low in every case. The growth has been very, very bad with its -11% for the last 5 years but mainly that comes from that 2008 was an exceptional earnings year with 481 million € which in 2009 dropped down to around 270 milllion € which it has now more or less kept flat. Comdirect has been strongly hit by the fact that fewer people are buying and selling stocks. The earnings have however increased so they have improved their margins. A more moderate view would be a growth of around 3.5% which would according to Lynch give a motivated P/E of around 11 and for Graham around 15. this means that the stock is with their current earnings overvalued. They are paying a good dividend of almost 6% which is probably demanded by Commerzbank since they need the money badly and as we see it is not sustainable since that represents over 110% of the earnings (with my running P/E that is!)

Conclusion: I would not buy Comdirect today. They are paying out a nice dividend but that will not last and once they decrease that the stock will most likely drop in value. I consider the company to be good and their earnings per sale is excellent but I would wait until it drops down to a P/E of 10 which would then also be more close to a P/B of 1.

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