Vonovia Shares Continue to Gain After Interest Rate Decision

Last Updated: 15. Dezember 2023By

It appears that Vonovia, a housing corporation, is performing better on the stock market. The stock gained almost 1% today, and 8% the day before, due to the decisions of central banks, especially the European Central Bank (ECB). The ECB has decided to keep interest rates low or even lower them in the coming months. This benefits Vonovia in multiple ways. As a housing corporation, they are sensitive to interest rates, as higher financing costs for housing projects or renovations means lower profits. Interest rates are also an important factor for calculating the future value of the company. Lower interest rates make future earnings more valuable, meaning higher rents or potential sales profits. This is an important factor when evaluating Vonovia.

Moreover, Vonovia is expected to report a net loss of over 5 billion euros this year, with net liabilities at around 40 billion euros. This makes Vonovia even more sensitive to interest rates when it comes to exchanging debt instruments. The outlook for next year is therefore improved due to the low interest rates, and net losses could be reduced by 80%.

Investors are paying a multiple of the revenue (market value at around 23 billion euros) for a company that has yet to make a profit. The only consolation is the dividend, which is estimated to be around 4%. This means that the interest rate development is positive, as seen in the last two days, but the stock is relatively expensive.