Henkel Stock: Bargain Entry or Caution Advised?

Last Updated: 13. November 2023By

Even in severe crises we must eat something and want to wash our hair with shampoo. The production of consumer goods is therefore considered crisis-proof. For this reason, the stocks of companies that produce such goods can be found in numerous portfolios.

A well-known German manufacturer of consumer goods is Henkel (WKN: 604843) from Düsseldorf. Well-known brands, such as Fa shower gel, Persil, Somat or Pril, ensure that the company can generate around 22 billion euros in annual sales.

In addition to the well-known brands, Henkel produces adhesives for industry. It may be that your smartphone is held together with an adhesive from Henkel. Although a large corporation, Henkel is still a family business. Around 200 descendants of the founder Fritz Henkel steer the fortunes of the company. They hold around 60% of the voting common shares of the company. According to its own statements, the family of Fritz Henkel’s founder is important and the goal is to continue it.

Chart Henkel, Source: Stock Screener Investor Verlag A look behind the scenes The production of crisis-proof consumer goods and a family at the top of the company pulling on the same rope – this sounds like a perfect corporate world, but it is not so rosy behind the scenes.

The preference share listed in the DAX has gained only 5% since the beginning of the year and has thus performed worse than the index. For comparison: competitor Beiersdorf from Hamburg gained 17% in the same period.

One reason for the weakness is Henkel’s withdrawal from the Russian business after Putin’s attack on Ukraine. Henkel had annual sales of around one billion in Russia. This corresponded to around 5% of total annual sales. The EBIT margin is also weaker compared to the smaller competitor Beiersdorf.

In addition, Henkel is struggling with the loss of market share in the detergent business. In the US there have been recent declines. Problems also arise in the retail business in the cosmetics sector.

For a loss of confidence among investors, it was also noted that Henkel was unable to maintain itself in China in recent months. Sales in all world regions increased this year – except in Asia. This is worrying, as Asia, especially China, is a growth guarantee for many companies.

P/E = 14 – an attractive entry point for brave investors Positive is that the margin in the first half of the year was 11.5%, above the 2022 level. Henkel is growing slower than the competition, but is also much cheaper. The stock is valued at 14 times earnings. For comparison, Beiersdorf’s P/E ratio is 28. Henkel could start a catching-up game and investors could benefit.

However, an entry requires a bit of courage and probably also a longer investment horizon. Decide for yourself if the Henkel share is something for your portfolio with this background.