Operational development
Rational primarily produces and sells combi-steamers for professional kitchens, achieving above-average margins through technological leadership and a strong focus on service. The long-standing culture of focusing on customer benefits makes the company exceptional.
This is reflected in the figures. In recent years, sales have increased on average in the high single-digit range, with a stable high EBIT margin of around 25-30%. Even during economic downturns, such as corona, the company has always remained profitable.
With underdeveloped markets in the US and Asia and the introduction of new products (iHexagon) and production facilities (China), Rational still has plenty of room for profitable growth.
However, the strong focus on a small number of products also harbors a risk if development goes wrong.
Valuation assessment
With a P/E ratio of 30 (2025e), the Rational share is fairly valued, but not cheap. The historical average is a P/E ratio of 33.
I have derived the intrinsic value per share and the expected annual return in the section "Financial ratios and valuation".
Rational suits long-term quality and growth investors.
The company impresses with an intact growth path, high and stable margins, a fantastic return on equity and a debt-free balance sheet.
The security is less suitable for short-term investors who expect quick price gains.
Those who buy should stick with it for the long term. Rational is a classic buy-and-hold stock with a strong moat.
Opportunities
🍀 Growth in underdeveloped markets: In the USA and Asia, only 10-15% of professional kitchens are equipped with combi-steamers. Rational can significantly expand its market share in these regions.
🍀 Strong brand image and customer loyalty: High customer satisfaction, loyal repeat customers and a clear focus on service ensure recurring sales and stable customer relationships.
🍀 Trend towards automation in professional kitchens: Skills shortages and cost pressure are increasing the demand for automated kitchen appliances. Rational benefits as a technology leader.
🍀 High cash flow: Rational generates high cash surpluses
🍀 Overcapitalized balance sheet: Possibility for special dividends and payout ratios above 100% exists
Risks
⚠️ Product focus on a few device categories: The company concentrates on three product lines. A decline in demand or technological disruption in one of these areas could have a significant negative impact.
⚠️ Market risks due to global presence: 90% of sales come from abroad. Political uncertainties, trade conflicts, customs duties and economic slowdowns are currently impacting business. The new plant in China could also cause problems.
⚠️ Overcapitalized balance sheet: The balance sheet gives management plenty of scope for mismanagement, particularly due to the concentrated shareholder structure.
⚠️ Shareholder structure is undergoing a generational change: A large proportion of the shares are held by a few first and second generation shareholders of the founders. Although this ensures continuity, it can lead to conflicts of interest or block new strategic impetus. Mismanagement must be recognized by the anchor shareholders.
⚠️ Increased valuation: A P/E ratio of 30 (2025e) indicates that shareholders believe growth is likely to continue for many years. If Rational AG deviates from its growth course for some time or permanently, there is considerable potential for a setback.
What to watch out for in the future?
We will be following the further development of the Rational share from now on. In our view, the following points should be monitored particularly closely in future:
Organic sales growth
- 7% annual growth primarily due to higher market penetration of combi-steamers and geographic expansion
Operating margin
- 25% due to competitive advantages
Success iHexagon
- Is Rational gaining new customers or are combined steam customers being replaced?
Commissioning of Chinese plant
- Is the plant in China off to a successful start?
- Is growth in China picking up again?
Customs policy
- Will the 15% tariff affect business in the USA?
Questions at the Annual General Meeting
- How profitable is the service business?
- What interests are the major shareholders pursuing?
- Why is there not more research into new products ("kitchen robots")?
Personal approach
Rational is on my personal watch list of "good companies".
In terms of quality, it is an exceptional company. The fact that this quality is traded at a premium is fine.
For me, an initial entry at prices below EUR 570 is a good idea. Subsequent purchases in the event of a setback would be at EUR 525, 460, 425 and 400.
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