Monday 30 September 2013

Analysis of BMW

A German car producer with three brands: BMW, Mini, Rolls-Royce

Company: BMW

Business: A German automobile and motorcycle producer. They have three units which are: BMW (also motorcycle), Mini and Rolls-Royce. They don´t really flash it on their homepage but they also have the car sharing called DriveNow which to me is of importance because they can use that as an extra buffer for when car sales are low etc.

Active: They are actively selling their cars all over the world but still the main bulk of production is either in Germany or in the UK (due to Mini and Rolls-Royce)

P/E: 10.4

contrarian values of P/E, P/B, ROE as well as dividend
The P/E for the BMW Group is great with 10.4 but the P/B is slightly too high with 1.7 still the total gives according to Graham that it is indeed a buy! They have an earnings to sales of 7% and the ROE is almost 18% which is very good. Book to debt is less appealing since it has a ratio of 0.3. The growth in the last five years has been 7.6% which is excellent! This gives us a motivated P/E of 22 to 24 which means that it is highly undervalued by the market today. They pay a dividend of 3.1% which is fully acceptable and that represents 32% of the earnings so no real fear of a decrease in the closest future.
Conclusion: I like it and then again I do not like it. The reason for why I do not like it is that the P/B is so high and that the book to debt is so low. Still I would understand if a person would decide to step into this cyclic company but it is not for me at the moment. Great cars though! Both to look at and to drive! Be careful with the backseat... because they are often a bit cramped.
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Unknown said...

What about Audi Ag, don't you like it?

Fredrik von Oberhausen said...

Hi Miguel,

Yes I do like Audi. They make excellent cars. However Audi belongs to Volkswagen today and for the analysis of Volkswagen you can look here.