Analysis of Talanx 2018

Company: Talanx 

ISIN DE000TLX1005 | WKN TLX100 

Business: A German mutual holding insurance company. It is divided into five divisions: Industrial Lines (covering all the insurance needs of industrial companies), Retail Germany (retail and commercial customers covering property/casualty), Retail International (outside of Germany), Reinsurance (non-life reinsurance via especially Hannover Rückversicherung that Talanx own to 50.2%) and finally Financial Services (an internal reinsurance part for the entire group). 

Active: In over 150 countries.

P/E: 13.7

Here you can find the previous analysis of Talanx 2017. 

The P/E of Talanx is looking ok with 13.7 and the P/B is also great with 1.0 which gives us a go from Graham. The earnings to sales are very low with only 2% and the is awful with 7.6%. The book to debt ratio is ok with 0.7.

In the last five year they have had a yearly "revenue" growth rate of 3.5% which corresponds to a motivated P/E of 12 to 15 which means that Talanx is today fairly valued by the market.

They pay an acceptable dividend of 3.8% which correspond to 53% of their earnings so a bit on the higher side of things.

Conclusion: Graham says yes and I say hold. P/E, P/B and dividend look good but the ROE is simply not good enough. Without the end of year natural disasters 2017 could have been a great year but now it was not and there is no guarantee that 2018 will not be hit by major disasters. In my opinion one should buy insurance companies when they are severely pushed down and Talanx is today not there but are instead fairly valued. I will hold on to the shares I have but I will not increase my holding.

Talanx annual report 2017

The report in full you can find here, to read my previous annual summary then click on Talanx annual report 2016 and to find out more regarding Talanx then go to analysis of Talanx 2017.

This year we can directly see the dangers of insurance companies. Up until August everything was looking very good for Talanx and they expected to get a wonderful profit by the end of the year but then they were hit with massive claims from Harvey, Irma and Maria as well as two earthquakes in Mexico. Due to these things the year went from being a success to being poor.

In the income statement below we see that they made a nice increase in Gross written premiums from 31 to 33 billion € but the earnings went from 1.6 down to 1.3 billion €. What annoy me the most is that they have started to complain which is only done to divert the blame. Pathetic! So starting with natural disasters, interest rates, US tax regulation, competition as well as BREXIT. I am neither amused nor am I impressed.

Conclusion: Talanx have become as whining as they previously were in MüRe before I stepped out. Since I have not seen crook behaviour here of talking down the share price before the CEO buys a massive amount of shares I will leave it as it is. I will remain as shareholder but must keep a closer eye on Talanx from now on.

Analysis of RWE 2018

Company: RWE 

ISIN DE0007037129 | WKN 703712 

Business: A German electricity and gas company. RWE currently have three pillars that it stands on: Conventional Power Generation (production of electricity, gas and oil), Energy Trading (buying and selling of electricity, gas and oil) and finally Innogyn (subsidiary, the green energy daughter).

Active: Europe mainly.

P/E: 6.9

Here you can find the previous analysis of RWE 2017. 

The P/E is looking good with 6.9 as does the P/B with 1.9 which means that Graham gives the green light on this one. The earnings to sales are not impressive with 4% but it is nothing strange for the field and the ROE is excellent with 28% but I would claim that comes from the high debt leveraging. The book to debt ratio is horrible with 0.12 which is in the region of banks.

In the last five years they have seen a yearly decrease in revenue in the size of -3.8% which is very bad and this then gives us a motivated P/E of around 8 which means they are fairly valued by the market today.

They try to invest some money into R&D in the size of 10% which I find to be ok.

If passed on the shareholders meeting then they will pay out a special dividend of one extra € to the normal payment of 0.5 € which gives us dividend of 7% which is excellent and this would be 48% of their earnings so fully acceptable also in that sense. The reason for the extra dividends in the nuclear taxes that came back and that the common shares have not received a dividend for the last two years.

Conclusion: Graham says yes but I am cautious. The P/E and P/B is good, the ROE also as is the dividend this year at least. However due to the deal with E.On it is a big question mark on the horizon and I would like to see what comes out of that before it is worth to look into any further investments. I will remain as a shareholder but I will not increase my position.

RWE annual report 2017

To read the report in full please go here, to see the previous summary then click on RWE annual report 2016 and to see the previous analysis of RWE 2017.

As can be seen in the income statement below for RWE the year of 2017 turned out to be a pretty good one. The revenue was down by around 1 billion EUR but the earnings had turned from a massive loss of 5.7 billion last year to 1.9 billion in earnings this year. What was a bit worrying in the report was that they predict continued revenue and earnings decreases during the coming years and that the "big" turn will not be until 2020. The interesting thing is that this was based on status quo and did not consider the massive deal that they have now done with E.On so it will be highly interesting to see how this deal will influence future revenues as well as earnings.

Conclusion: The German energy market is going thru a massive change, which was not mentioned in this report, and as a shareholder I look forward to owning two companies that are highly specialised in their independent fields. So I will remain as a shareholder for now and will keep an eye on that the oil giants have started to step into the field of more green energy production.

Analysis of Nike 2018

Company: Nike

Business: An American company that are selling and developing athletic footwear, apparel, equipment and accessories. They have several brands: Nike, Nike+, Hurley, Jordan Brand and Converse.

Active: They are present world wide and they are known world wide by name and symbol.

P/E: 25.6

For a previous analysis please click on analysis of Nike 2017.

The P/E of Nike is very high with 25.6 and so is the P/B with 8.8 which gives a clear no go from Graham. Earnings to sales are ok with 12% and the ROE is excellent with 34.2%. The book to debt ratio is full ok with 1.1.

In the last five years they have had a yearly revenue growth rate of 6.3% which is excellent and this gives us a motivated P/E of 19 to 21 which means that the market is currently overvaluing Nike.

They pay a tiny dividend of 1% which happily only correspond to 27% of their earnings so they should be able to keep it up.

Conclusion: Graham says no and so do I. The P/E and P/B is too high, the ROE is great but the dividend is meaningless. I will remain as a shareholder fully knowing that next year will be a tough one due to the taxes but I will not increase my position any further.