Analysis of EADS

Company: Airbus (prev. EADS)

Business: A German group working with aerospace and defence. In the group there are four daughter companies: Airbus (building commercial as well as military aircrafts), Astrium (space program with for instance satellites), Cassadian (global security systems and solutions - IT networks) and finally Eurocopter (civil as well as military helicopters)

Active: They are present on over 170 sites world wide and at least claim to promote ethics, compliance and transparency (but we all know weapons end up everywhere anyway...)

P/E: 35.1

The P/E for EADS is crazy high with 35.1 and the P/B is even worse with 4.2 that is insane! This gives a very clear no go according to Graham. Their earnings to sales is down at only 2% so pretty bad! The ROE is so, so with almost 12% but the book to debt is insanely bad with a ratio of 0.1 that is like a bank! In the last five years they have had a very nice growth of yearly 5.5% which gives a motivated P/E of 16 to 19 which means that EADS is highly overvalued by the market. Are people expecting a more serious war to break out? They spend a large chest of gold on research but I guess it is a tough business because they are up at 260% of their earnings so it feels as if it is a bit too much. They do pay a tiny dividend of 1.1% which represents as much as 40% of their earnings so no real reason to increase but can probably at least remain as it is.

Conclusion: When I saw that Airbus was part of EADS and that it was a defence company I got fairly excited about it. The rule says never to invest in airplane companies but a company building airplanes could be exciting. The defence part I find less of interest. However... my high hopes quickly eroded when the data started to be analysed and both I and Graham gives a very clear no on this company. It looks to be far too highly valued to be of any interest besides from selling.

If this analysis is outdated then you can request a new one.