Is Fresenius-Del (WKN: 578560) finally safe again? Many investors are probably asking themselves that now. In any case, the share price consistently continues to collapse. With a price level of EUR 24.47, we again reached fairly low levels below EUR 25.
However, the security also depends on the fundamental valuation. Fresenius stock can score here, and possibly also with an exciting strategy change. That might be enough. But still: Absolute security is quite difficult in this market phase.
Fresenius share: does it make it safer?
Anyway, the fundamental valuation of Fresenius stock is again, well, very, very cheap. Assuming a worst-case scenario of a 5% decline in net income for the year, we still don’t get a price-to-earnings ratio much above 8. The dividend yield is also very strong at 3.75%. At least that should be the return that we can certainly expect in the future. After all, it is based on a payout percentage of just under 30%.
In this connection: If the business model behind the Fresenius share only develops stagnantly, this may mean a small turnaround or moderate returns. Under this assumption, we can at least describe it as relatively safe. But that’s not all.
Management gets a breath of fresh air. CEO Stephan Sturm will be replaced by Michael Sen this autumn. It is admittedly early praise: But it may be precisely this fresh wind that is needed to give the share price a boost. In any case, the shares of the only Dividend Aristocrat in the DAX are very cheap. They have also remained relatively stable during the pandemic, at least operationally. Qualities to play out now.
Debt and individual segments give you a headache
Still, the debt with which parts of the growth were previously financed, as well as individual business divisions, are giving Fresenius shares a headache. Maybe for total debt: Debt less current cash is currently about $29.4 billion. It’s not a little.
Additionally, there is the existing dampening growth outlook in Medical Care due to the excess mortality of dialysis patients. Helios has experienced some problems with the strategy of possibly selling or merging individual assets.
Still, the core question is what options there are for what risks and what assessments. I’m inclined to say: Yes, Fresenius stock is again safer based on this valuation. What is decisive, however, is operational coherence.
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Vincent owns shares in Fresenius. The Motley Fool recommends Fresenius.