Siemens Aktiengesellschaft (SIE.DE)

Equity
Germany
Industrials

RISK

RETURN

Key risk factors

Very vulnerable to price shocks

Modest price volatility

Fair trading liquidity

Key return factors

Solid dividends

Good growth

Good margins and returns

Company profileSiemens Aktiengesellschaft, a technology company, focuses in the areas of automation and digitalization in Europe, Commonwealth of Independent States, Africa, the Middle East, the Americas, Asia, and Australia. It operates through Digital Industries, Smart Infrastructure, Mobility, Siemens Healthineers, and Siemens Financial Services segments. The Digital Industries segment offers automation systems and software for factories, numerical control systems, motors, drives and inverters, and integrated automation systems for machine tools and production machines; process control systems, machine-to-machine communication products, sensors and radio frequency identification systems; software for production and product lifecycle management, and simulation and testing of mechatronic systems; and cloud-based industrial Internet of Things operating systems. The Smart Infrastructure segment offers products, systems, solutions, services, and software to support sustainable transition in energy generation from fossil and renewable sources; sustainable buildings and communities; and buildings, electrification, and electrical products. The Mobility segment provides passenger and freight transportation, such as vehicles, trams and light rail, and commuter trains, as well as trains and passenger coaches; locomotives for freight or passenger transport and solutions for automated transportation; products and solutions for rail automation; electrification products; and intermodal solutions. The Siemens Healthineers segment develops, manufactures, and sells various diagnostic and therapeutic products and services; and provides clinical consulting services. The Siemens Financial Services segment offers debt and equity investments; leasing, lending, and working capital financing solutions; and equipment, project, and structured financing solutions. Siemens Aktiengesellschaft was founded in 1847 and is headquartered in Munich, Germany.

Valuation: Slightly overvalued

Multiple

TTM

NTM

P/E

9.50

30.90

PEG

0.10

P/B

1.50

2.50

P/S

1.80

1.60

P/FCF

15.30

17.40

EV/EBITDA

13.80

13.10

Based on key historical and expected multiples, the stock is slightly overvalued relative to its peers. Specifically, the stock is fairly valued on P/E, neutral on EV/EBITDA, and reasonably priced on P/FCF.

Performance: Mixed

The stock has been growing steadily in the past six months, adding 21% in total. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 16ppts over past six months and grown 1ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

Analyst view: Slightly negative

The average target price is 148 and suggests 17% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 190.0. This translates into 7% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 74.0. This is equivalent to 58% downside potential in the worst case.

Profitability: Good

RoE

Siemens Aktiengesellschaft reported a return on equity (RoE) of 16.1% in the last 12 months, down from 19.3% in FY23. The market consensus projects an RoE of 20.0% in FY24, again ahead of its peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to 5.1% in the last 12 months, a decrease from 6.1% in FY23. The market analysts predict that RoA will be 6.4% in FY24, again weaker than its peers.

RoCE

In the last 12 months, the return on capital employed (RoCE) declined to 7.4%, below the peers. The consensus estimate for FY24 for RoCE is 13.1%, again behind the peers.

Net margin

EBITDA margin

Historically, SIEGY has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 9.5%, down from 11.3% in FY23. The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 17.1% in the last 12 months, a decline from 20.2% in FY23.

RoIC / WACC = 1.3(average value creation)

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.3 in the past several years. This ratio implies a average shareholder value creation.

Growth: Good

Revenue

EBITDA

EPS

Free cash flow

SIEGY reported revenue of EUR 77 856mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 16% from FY23 to EUR 9.38. Market expects EPS to reach EUR 5.66352 in FY24.Revenue growth has been constrained in the past several years (negative-to-neutral), while EBITDA growth has been weak. This all contributed to very fast EPS growth (strongly positive). The FCF trend is in line with EBITDA. We emphasize the highly volatile dynamics of FCF and EPS.

Dividends: Solid

Dividend paid

Dividend yield

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends annually.

Default risk: Moderate

The risk of default is moderate. We note strong positions in its industry and adequate interest coverage, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, and poor working capital management.

Volatility: Modest

In normal market circumstances, SIE.DE is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to notable.

Stress-test: Vulnerable

In highly turbulent market conditions, SIE.DE is highly volatile. In other words, the stock will fall substantially more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be significant.

Selling difficulty: Small

SIE.DE has above average trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually quite stable and is unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.