Analysis of Deutsche Post 2014

Company: Deutsche Post

Business: A German global mail and logistics company. They are divided into four divisions: Post-eCommerce-Parcel (domestic mail services and all the parcels coming from the growing e-commerce business), Express (transportation of urgent documents and goods from door to door), Global Forwarding & Freight (the air, ocean and road freight transport) and finally Supply Chain (warehouses, logistics services and value added services).

Active: World wide with presence in over 220 countries.

P/E: 15.9

Here you can find the previous analysis of Deutsche Post.

The P/E of Deutsche Post is a little bit too high with 15.9 but the P/B is far too high with 3.4 which gives a red light from Graham. The earnings to sales are ok with 4% and the ROE is really impressive with 21.2% (but they have decreased book value and increased their debt significantly since the last analysis so they seem to have leveraged their ROE higher with the debt). The book to debt ratio is no longer looking very nice with 0.4. In the last six years they have had a yearly growth of 0.2% which is seriously bad and this gives us a motivated P/E of 8 to 10 which means that Deutsche Post is today overvalued by the market. They pay an ok dividend of 2.9% which represents 46% of their earnings so it should be possible to keep it up.

Conclusion: Both Graham and I find Deutsche Post too expensive today. The ROE is indeed looking very nice but in my opinion it has been artificially promoted by increased debt and one almost wonders if the management are getting bonus based on the ROE %-age. The revenue is also flat since a long time back and that is a big concern to me with Deutsche Post. So I will stay away from this company for the time being.

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