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Siemens looks cheap in Industrial Conglomerates

|Includes: VAALCO Energy, Inc. (EGY), GE

This big stable industrial is turning upward with the global economy. The estimates are being raised with annual growth projections of 34% for the next 5 years. Even with a modest growth of 18.66% from 2010 to 2011, the growth is higher than the 12.28 PE ratio. The 5 year average PE of Siemens is around 14.62. Earnings projections for 2011 are at 8.31, therefore an average multiple of 14.6 calculates to a projected share price of 121. If things pick up and we use a modest 18.66 multiple, the price moves upward to $155, or a 55% return.

Also, it looks cheap as compared to peers. GE is only growing annually at a projected 9% for the next 5 years but sports a larger 18.24 PE ratio. GE has a GPE of 2.07 compared to just 0.43 for SI, or 0.65 if you use my more conservative growth rate of 18.66.

This company is seeing new orders like the one recently from Canada for Wind Turbines. "Dow Jones reported that Siemens AG said it got an order for 43 wind turbines for an onshore wind park near Chatham, Ontario from Renewable Energy Systems, or RES, Canada Inc., an affiliate of RES Americas. Siemens will deliver 43 of its 2.3 megawatt turbines, starting in June 2011, bringing the installed capacity of the project to a total of around 100 MW." -- quoted from Reuters News.

March 26th, the company posted some conservative numbers. As long as the world economy continues in recovery, I would expect the numbers to look better when they update their business projections at the end of April. You may want to wait until that time before buying any shares to get a more clear picture. Although valuations at this point look very reasonable.

Here is an exerpt of what the company had to say in March.
"The market is stabilizing, although our business environment remains challenging," said Heinrich Hiesinger, CEO of the company's industry division. "Stabilizing factors include growth in transportation and the rail market, Siemens said, adding that the bottom in short-cycle manufacturing industries has been reached. "

Disclosure: Just started a long position on April 7th, 2010