Analysis of Rheinmetall 2016

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 Aftermarket (parts for the spare part market). The Defence is also divided into three parts: Weapon and Munition (Large and medium calibre weapons and ammunition), Electronics Solutions (air defence systems, sensors and various simulation systems) and finally Vehicles Systems (logistical and tactical vehicles).

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

P/E: 19.4

Here you can find the previous analysis of Rheinmetall 2014 with the request for a new analysis from Walhroos. 

The P/E of Rheinmetall is high with 19.4 and the P/B is ok with 2.0 still according to Graham we receive a no go. The earnings to sales are low with only 3% as is the ROE with only 10%. The book to debt ratio is also very low with its 0.4 which I do not like.
In the last five years they have had an acceptable yearly revenue growth rate of 2.8% and this then gives us a motivated P/E of 9 to 14 which means that Rheinmetall is today overvalued by the market.
They pay a tiny dividend in the size of 1.6% which happily only correspond to 32% of their earnings so hopefully they should be able to keep it as it is. Rheinmetall does however change the dividend based on their earnings.

Conclusion: Graham says no to Rheinmetall and so do I today. For me the P/E is too high and the ROE, book to debt and dividend are all too low for being of interest. The turn around has already happened in Rheinmetall and I am sure that the share price can go higher, as it always can, but it will not be with me as a shareholder.

If this analysis is outdated then you can request a new one.