Siemens Healthineers: Unspectacular but Solid

Last Updated: 9. November 2023By

After the stock markets have recently gotten back into better shape, many investors are looking for stocks that still have catch-up potential. One of them I would like to present to you today.

Brief portrait of Siemens Healthineers The Siemens medical technology subsidiary has been listed on the stock exchange for several years. The company specializes in medical imaging (diagnostic devices such as magnetic resonance imaging, mammography, X-rays, and ultrasound) and has established a second important foothold in cancer care (radiation therapies) through the acquisition of Varian in 2021. Other business areas include laboratory diagnostics, digital health services, and hospital management.

Thanks to the increasing importance of early detection in medicine and the high proportion of recurring revenues from service and maintenance services, Siemens Healthineers offers a crisis-resistant business model with solid growth rates.

Fourth quarter ran slightly better than expected For the fourth quarter of the 2022/2023 financial year, which ended in September, the company reported a 7.5% increase in sales to 6.06 billion euros. Analysts had only expected 5.90 billion euros beforehand. The net profit was in line with expectations at 537 million euros.

Thanks to the tailwind in the final quarter, sales for the entire 2022/2023 financial year could be slightly increased (+1%) to 21.7 billion euros. The adjusted earnings before interest and taxes (EBIT) fell by 16% to 3.08 billion US dollars. This does not sound exhilarating. However, the largely absent business with Corona rapid tests weighed on the result. In the previous financial year, these had contributed 1.5 billion euros to sales, now it was only 121 million euros. Thus, the other business areas have developed quite well.

Management expects higher growth rates again For the current financial year 2023/2024, the company is expecting increasing growth rates. For sales, the increases are expected to be in the range of 4.5 to 6.5%, slightly higher for profits.

In the following years, growth should accelerate. Here, the company reaffirmed its goals already mentioned in the past: from the year 2025, the earnings per share should increase in the double-digit percentage range and the sales in the mid to high single-digit percentage range.

The stock is comparatively cheap The stock has developed solidly since its IPO in the spring of 2018, but the big price gains have so far been absent. Compared to other large medical technology companies from the USA, the stock is valued at 2.3 times sales and 22 times the profit forecast for the current financial year.

The same also applies to the valuation comparison with the previous years. This means: the current stock price does not sufficiently reflect the positive development of the business in the past years.

So bargain hunters can take a look at the stock. You shouldn’t expect quick, high stock gains here. But for long-term oriented investors, a good chance-risk ratio is offered.