Siemens (SI) is a German multinational corporation headquartered in Munich. It operates in the industry, energy, healthcare, and financial sectors of the economy. It is the largest electronics company based in Europe and employs over 360,000 people. It is listed on the New York Stock Exchange. Its main competitors include General Electric (GE), and Hitachi (HTHIY.PK).
In the financial year ended September 2011, Siemens reported annual revenue of €73.52 billion, operating income of €7.958 billion, and net income of €6.145 billion. It has total assets of €104.24 billion, and total equity of €31.53 billion. On the NYSE, it currently has a share price of $81.94 and a market capitalization of $72.02 billion.
Siemens' greatest advantage over other companies is its diversity. In these uncertain economic times, a company as diverse as Siemens is less exposed to shocks in the markets than companies which rely on the health of one industry for steady revenues. Therefore, the company's financial health in the future seems secure. Having said that, the company could face problems from the European sovereign debt crisis as 60% of its revenues come from Europe. Nevertheless, overall it is a much more stable company than the great majority of its peers.
Siemens is poised to benefit off the green energy drive. As renewable and clean energy sources become increasingly important, Siemens is positioned as one of the largest wind turbine manufacturers. It is primarily a producer of offshore wind turbines and it has beaten out General Electric among others for control of this arena. Currently, it is not clear how economically viable these wind turbines can be, however, as Siemens expands production and develops cheaper turbines, the company should benefit immeasurably off its position in the long run. Siemens is also attempting to expand into the onshore turbine market and only time will tell how successful this attempt will be.
Siemens' solutions for industrial companies are a big revenue generator for the company. It gets over 15% of its revenue from its automation technology, industrial controls, and industrial solutions. The company is one of the most well regarded producers in this area and many manufacturers utilize Siemens' technology. Siemens should continue to grow in market share in this area as it has significant costing advantages over most of its competitors.
Siemens is also refocusing and trimming some of the fat from its structure. The company is continuing to announce lay offs as it seeks to streamline its production line. This should help it to increase its productivity and efficiency, improving its profit margins over the long term. These changes are very important as Siemens is facing increasing competition in many of the industries it operates in. The changes will allow the company to become more competitive and to price some of its products more attractively where necessary.
The company has roughly similar profit margins and revenue growth to the industry average. However, its earnings per share growth rate is remarkably higher than the industry average. Its EPS growth on average over the last three years has been 59.6% compared to an industry average of just 14.3%. Its debt/equity ratio is also remarkable. It has a debt/equity ratio of just 0.5 compared to an industry average of 1.8.
Siemens' future is tied to the larger economy as the main sectors it operates in all tend to fluctuate with the economy. Specifically, Siemens is highly dependent on the German economy which is actually a great bonus and not a detriment at least for the time being. The strong German economy will help Siemens to thrive even if the global economic situation worsens.
Morningstar rates Siemens' fair value as $126.00 per share and gives it a 5-star rating. The Motley Fool gives Siemens 5 stars as well. With over $5 billion in free cash flow, over $2 billion spent on capital expenditures, and very low debt levels, Siemens is well positioned to reward shareholders while expanding and replacing out of date machinery. Overall, at a price of $81.64 per share, I believe Siemens is very undervalued and a great deal.
My data is from morningstar.com unless otherwise stated. Please feel free to comment if I have left anything important out of my analysis.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.