Imagine you could buy one of the world’s largest car manufacturers – and on top of that, you get luxury brand Porsche and commercial vehicle company Traton for “free.” Sounds too good to be true? That’s how Volkswagen ($VOW (-0,15%) ) is currently valued on the stock market. But why is this the case, and what does it mean for investors? Let’s break it down!
SWOT Analysis: Where Does VW Stand?
Strengths
- Brand diversity: With Volkswagen, Audi, Porsche, Škoda, and Lamborghini, VW covers nearly all market segments.
- Financial stability: Net liquidity of €34.4 billion in the automotive sector provides security.
- Electromobility: Successful models like the ID.7 and ID.Buzz show VW’s progress in electric mobility.
Weaknesses
- Dependence on China: Deliveries in this crucial market have fallen by 10%.
- High investment needs: 13.6% of revenue is spent on R&D.
Opportunities
- Valuation: The stock is currently priced so low that VW’s core business is almost “free.”
- Technology: Partnerships, like with QuantumScape, could give VW a long-term edge.
Risks
- Competition: Tesla ($TSLA), BYD ($BYD), and Chinese manufacturers are increasing the pressure, especially in electric vehicles.
- Regulation: CO₂ fleet targets could lead to additional costs.
Volkswagen: A Bargain?
Volkswagen’s current market capitalization is €55 billion. But how does this low valuation come about? A look at its subsidiaries reveals something surprising:
- Porsche AG ($P911 (+0,35%)
): Market cap of €51 billion. VW holds 75%, worth €38.25 billion. - Traton SE ($8TRA (-0,07%)
): Market cap of €15 billion. VW holds 90%, worth €13.5 billion.
Together, that adds up to €51.75 billion 👉 Conclusion: Just the stakes in Porsche and Traton are nearly worth the entire market cap of Volkswagen. This means that VW’s core business, which generates billions in revenue and profit each year, is practically “free.”
Dividend: Attractive but Risky
Volkswagen offers a dividend yield of 9% (€9.00 per share at €100 share price) – a dream for dividend investors. But this high payout also reflects the challenges ahead: Profits are declining, and significant investments in electric mobility and restructuring could put pressure on future dividends. While liquidity remains robust at €34.4 billion, risks such as fines for CO₂ fleet targets or restructuring costs of €2.2 billion could lead to dividend cuts. Nonetheless, VW still offers an attractive dividend that would remain interesting even if reduced.
Graham Valuation: What’s VW Really Worth?
Benjamin Graham, Warren Buffett’s mentor, developed a simple method to calculate the fair value of a company. His formula considers both earnings per share (EPS) and growth potential. Let’s apply this to Volkswagen:
VW’s EPS is €24.3. To stay conservative, we’ll assume a moderate long-term growth rate of 2% (just around inflation). Graham’s formula is essentially: The value of a company equals EPS multiplied by a base value of 8.5, plus a growth factor. If we apply the numbers: €24.3 × (8.5 + (2 × 2)) = an estimated fair value of over €300 per share.
Even with 0% growth, the calculated value is still €206 per share – well above the current price of around €100.
Of course, this is just an estimate and doesn’t factor in risks like challenges in the EV market or high investments. But even under conservative assumptions, Volkswagen could be significantly undervalued. 🚀
Conclusion: Bargain or Too Much Risk?
Volkswagen may seem like a bargain with a market capitalization of €55 billion – with Porsche and Traton covering almost the entire value. But what about the risks?
- EV Battle: Tesla $TSLA (-4,32%) , BYD $1211 (+2,45%) , and Chinese manufacturers are making life tough for VW – especially in China, where deliveries have fallen by 10%.
- High Costs: Billions are flowing into electric mobility and restructuring. Can profits and margins keep up?
- Regulatory Hurdles: CO₂ targets and potential tariffs could add further pressure.
What do you think: Will VW make it through the transformation, or are the risks too great? Let me know in the comments!
Source: VW Quarterly Statement Q3
Picture: ChatGPT
