Thursday 21 April 2016

Analysis of Daimler 2016

Daimler, a German automotive producer

Company: Daimler 

ISIN DE0007100000 | WKN 710000 

Business: A German automotive company. They have several brands and to list a few: Mercedes-Benz Cars (Mercedes-Benz and Smart), Daimler Trucks (MB, Freightliner, Fuso etc.), Mercedes-Benz Vans (MB and Freightliner), Daimler Buses (MB and Setra) and then they have Daimler Financial Services (leasing). All the brands can be found here. They also have the car rental service called Car2Go and it costs 29 ct/min. 

Active: World wide in over 200 countries. 

P/E: 7.9

Here you can find the previous analysis of Daimler 2015

contrarian values of P/E, P/B, ROE as well as dividend for Daimler

The P/E for Daimler is excellent with 7.9 and so is the P/B with 1.3 which gives a very clear buy signal from Graham. The earnings to sales are ok with 6% and the ROE is also fully acceptable with almost 16%. The book to debt ratio is low with 0.3 but also Daimler have a large financial service business which makes this value understandable.
In the last five years they have had an astonishing yearly revenue growth rate of 7%! This then gives us a motivated P/E of 19 to 23 which means that Daimler is today highly undervalued by the market.
The spend a good portion of their earnings in R&D since the value is as high as 57% but the world is changing and the only way forward is development.
They pay an excellent dividend of 5.2% which still only correspond to a bit more than 40% of their earnings so hopefully they will be able to keep it up also in the future.

Conclusion: Graham says yes to Daimler and so do I. The P/E, P/B, ROE and dividend are all excellent and the growth they have managed to push out is amazing considering their size. To chose between Daimler and BMW would be tough and I would need to go over the check list to really see which one to pick in the end. The long term potential benefit for Daimler is that they are pretty heavy into trucks/buses etc which have a different sales cycle compared to passenger cars.

If this analysis is outdated then you can request a new one.


raheel said...

Hi again,

In general, how would you rate dividend safety in cyclical industry of car/motor manufacturing? Also, may be I am wrong, I think that Shiller PE could be a better metric than TTM PE. Would you agree with that?


Anonymous said...

Hi Raheel,

Safety? Non at all. Acceptable when counted together over a longer time period? Then pretty ok.

Shiller is good. Go for that!

Fredrik von Oberhausen