Analysis of Deutsche Post 2016

Company: Deutsche Post 

ISIN DE0005552004 | WKN 555200 

Business: A German global mail and logistics company. They still have 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 in over 220 countries. 

P/E: 20.7

Here you can find the previous analysis of Deutsche Post 2015. 

The P/E of Deutsche Post is high with 20.7 and even though the P/B is a bit more acceptable with 2.9 the overall score still gives a no go from Graham. The earnings to sales are low with 3% but the ROE is still pretty ok with almost 14%. The book to debt ratio is not so good with 0.4 but their logistics network is large and to build it has meant heavy investments.

In the last five years they have had an acceptable but also not more than that yearly revenue growth rate of 2.3% which means that we end up with a motivated P/E of 9 to 13 which means that Deutsche Post is today overvalued by the market.

They pay a good dividend in the size of 3.4% but this does however eat up 70% of their earnings so they better start improving those earnings or it will not be sustainable.

Conclusion: Graham says no to Deutsche Post and so do I. The P/E, P/B and dividend pay out ratio is too high and the ROE and book to debt I find to be too low for being of any interest to invest in. I do however very much enjoy their services and I have as of yet found them to be fairly reliable. In Berlin they are making a change that worries me. They have completely outsourced the delivery business and ones sees very few DHL marked vans driving around in the streets. The benefit is that they do not have to keep that fleet of vans/trucks and I guess they can afford to do this in countries where they are very well known and do not need the advertisement. Often, here in Berlin, these little vans have polish registration signs on them and to me that feels like a big bucket of grey zone that Deutsche Post have started to work within to cut costs and to increase profits. So I will definitely stay away from Deutsche Post. 

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