When stocks continue to rise after an IPO, it is often referred to as a success. Of Porsche AG (WKN: PAG911) has therefore had a good start on the stock market. After their debut, shares are up more than 12% year to date.
But more important than the short-term increase is the long-term perspective. It is crucial to buy good companies cheaply. Although shares of successful companies usually increase by several thousand percent in the long term, if we buy them at high values, they may not increase at all for ten years. Microsoft (WKN: 870747) and Walmart (WKN: 860853) between the years 2000 and 2010 are two examples.
So is Porsche AG stock still a post-IPO buy?
Porsche: Return of a successful share
First of all, we can all be happy that a very good car group is returning to the stock market. After the failed one VW (WKN: 766403) takeover attempt in the crisis year 2008, the shareholders only indirectly benefited from the company’s strong operational success.
Mainly due to its involvement in China, Porsche increased its sales from around 100,000 to 300,000 cars between 2008 and 2021. However, the group has a balanced geographical distribution of sales with 26% North America, 29% Europe, 32% China and 13% for the rest of the world.
In the last three years alone (2019 to 2021), revenue and profit have increased from 28,518 to 33,138 million euros and from 2,801 to 4,038 million euros. The average profit margin was 11.0% and the return on assets averaged 7.1%.
Porsche also has an equity share of 44.6 per cent. Such good financial figures are rare in the automotive sector and usually only possible in the luxury segment. Ferrari (WKN: A2ACKK ), for example, is similarly successful and offers a taste of how Porsche AG stock may fare in the future.
The shares are currently valued at approximately fair value. They currently trade at a price-to-earnings (P/E) ratio of 20.5 and a price-to-book (P/B) ratio of 3.6. In contrast, Ferrari appears very expensive with a P/E of nearly 40 and a P/B of 15.9 (06/10/2022).
In the first half of 2022, Porsche was able to increase its revenue by 8.5% to EUR 17,922 million, despite a 5.1% decrease in sales. The result shows that manufacturers of luxury cars can much more easily implement price increases even in crises and still keep sales relatively constant. Profit rose even more in the first six months of 2022, up 18.3% to €2,505 million.
For 2022, Porsche expects sales of 38 to 39 billion euros (2021: 33.1 billion euros). The medium-term growth target is 7 to 8%. The company also wants to increase its return on sales from 16% (2021) to 17 to 19% in the medium term.
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Christof Welzel does not own any of the shares mentioned. The Motley Fool owns and recommends shares of Microsoft, Porsche Automobil Holding, Volkswagen AG and Walmart Inc.