Friday 19 September 2014

Analysis of Rheinmetall 2014

Rheinmetall, a German automotive and defence supplier

Company: Rheinmetall

ISIN DE0007030009 | WKN 703000

Business: A German supplier for the automotive and defence. Automotive called KSPG is divided into three segments: Hardparts (pistons and pistons systems), Mechatronics (pumps and valves) and finally Motor Services (parts for the spare part market). The Defence is also divided into three parts: Combat Systems (turret and weapon stations, self protection, armoured vehicles), Electronics Solutions (air defence systems, sensors and various simulation systems) and finally Wheeled Vehicles (logistical and tactical vehicles).

Active: They are present in over 80 countries world wide.

P/E: 57.5 (P/E5: 15.6)

Here you can find the previous analysis of Rheinmetall.

Contrarian values of P/E, P/B, ROE as well as dividend for Rheinmetall

The P/E of Rheinmetall is awful with 57.5 and even the P/E5 is running slightly too high with 15.6. The P/B is fully acceptable with 1.3.  Based on the current P/E Graham says no to Rheinmetall. The earnings to sales is nothing to be impressed of with only 1% and the same goes for the ROE with 2.2%. The Book to debt value is also pretty low with 0.4 which I also do not like that much.
In the last six years they have had a yearly revenue growth of 3.2% which is very good (the growth was more or less flat the last two years). This growth then gives us a motivated P/E of 12 to 15 which means that based on P/E they are overvalued at the moment but based on P/E they are fairly valued.
They pay a tiny dividend of 1% which then corresponded to 55% of their earnings so pretty high but doable.

Conclusion: Graham says no and I am slightly less negative. The cycle of Rheinmetall seems now to be seriously on the down slope and based on the half year 2014 they are still not out of the woods yet. The P/E is far too high, the P/B is ok, ROE is bad, dividend is bad. It could be a contrarian, good moment to step in as a shareholder. I will think a little about it but personally I would prefer to see that the turning point has started before I want to step in and we are not yet there.

Due to the poor performance in 2013 Rheinmetall got kicked out from the Stocks of Interest list even when I entered the P/E5 to balance the cyclic behaviour. The kicked out list is growing for each analysis...

If this analysis is outdated then you can request a new one.


Anonymous said...


Could you do a recap on Rheinmetall? Stock is near ath, apparently giving the state of the world, cannons and tanks are easy to sell. Just thinking has the stock price gone to the point where might be good to offload shares.


Fredrik von Oberhausen said...

Hi Walhroos,

Sure I will take a look at them for you.

Hmmm... everyone keeps saying that the world has never been as peaceful as it is today and given that that is true... which it is... then Rheinmetall should not be having the time of their life.

Fredrik von Oberhausen said...

I see that they arrive on the 17th of March with their full year report for 2015. Since I do not like to guess values I will wait until that report before I make the analysis.

Things to think about though... increased shares by around 10% via exclusive rights offering (total shares now 43.56 M and increased capital around 230 M €)... company have themselves, before the rights offering, been selling their treasury shares. The topping on the cake was that the new shares would receive dividends for 2015. The year before the dividend was 0.3 € and I would not be surprised if there will be a substantial increase in dividend payment.