Can the Fresenius share be doubled in value in 5 years?

that Fresenius-The share (WKN: 578560) should be doubled in value in five years? In the last five years, the share certificates have more or less halved in value, which has made the DAX Dividend Aristocrat a mixed investment.

But let’s look to the future with optimism: the Fresenius share will hardly reach this goal with dividends alone. Based on a stock price of EUR 31.90 and a dividend of EUR 0.92 recently paid out, the dividend yield would be 2.88%, which is not low. But in the optimistic scenario, it would only yield a return of 15% during that period.

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In this respect, there should still be a price return of 85% to achieve this goal. But is it realistic? Let us look at the prerequisites for achieving this.

Fresenius share: The road to 85% share price development

Basically, the Fresenius stock is very, very cheap, which may pave the way for this goal. For 85% stock price development, there may be a premium even in stagnation. Measured at this price level, the price-earnings ratio is currently below 10. The dividend yield is also very cheap for a payout percentage of around 28% and with a price-to-sell ratio of below 0.5, we also see a discount.

A PER of 12 alone can therefore mean a marked double-digit price return. But that would not be enough for 85% price benefit. Based on this valuation, we would have a share price of 59.01 EUR. Or a price-to-earnings ratio of 17.9 and a dividend of just 1.56%. Nor would it necessarily be expensive. But we probably needed something to justify it.

What would justify this valuation of the Fresenius stock is moderate growth. Fortunately, it is there now. In the first quarter of the year, earnings grew per. share again with 3% in constant currency and with 6% in nominal terms. Such gains would already be enough to achieve it given the cheap valuation. After all, even a five-year average of 4% would result in a price-to-earnings multiple of 7.9 based on current prices, and even with an 85% premium of 14.7. It still looks moderate to me for the quality of a dividend aristocrat.

Possible!

For me, the scenario that the Fresenius share will double investors’ investment in five years is a realistic scenario. Eventually, it stands and falls with a moderate growth history. If achieved, the way is clear for such a performance.

The basic valuation would remain cheap. In addition, the DAX Dividend Aristocrat should deliver further dividend growth with a favorable fundamental valuation. With these prerequisites and a defensive quality, the stock can easily double in value in five years. In any case, I see a solid risk-reward ratio for this DAX quality share to achieve it.

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Vincent owns shares in Fresenius. The Motley Fool recommends Fresenius.

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