| Evonik Industries AG (DE000EVNK013) | |||
17,25 EURStand (close): 01.07.25 |
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| Datum / Uhrzeit | Titel | Bewertung |
| 16.04.25 08:04:54 | Evonik Industries' (ETR:EVK) Returns Have Hit A Wall |  |
| What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Evonik Industries (ETR:EVK), it didn't seem to tick all of these boxes. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Understanding Return On Capital Employed (ROCE) If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Evonik Industries is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.053 = €834m ÷ (€20b - €4.1b) (Based on the trailing twelve months to December 2024). Thus, Evonik Industries has an ROCE of 5.3%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 8.4%. View our latest analysis for Evonik Industries XTRA:EVK Return on Capital Employed April 16th 2025 Above you can see how the current ROCE for Evonik Industries compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Evonik Industries . What The Trend Of ROCE Can Tell Us There hasn't been much to report for Evonik Industries' returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Evonik Industries in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. That probably explains why Evonik Industries has been paying out 61% of its earnings as dividends to shareholders. These mature businesses typically have reliable earnings and not many places to reinvest them, so the next best option is to put the earnings into shareholders pockets. What We Can Learn From Evonik Industries' ROCE In a nutshell, Evonik Industries has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 14% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options. Story Continues Evonik Industries does have some risks though, and we've spotted 2 warning signs for Evonik Industries that you might be interested in. If you want to search for solid companies with great earnings, check out this freelist of companies with good balance sheets and impressive returns on equity. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 26.03.25 05:24:49 | Institutional investors in Evonik Industries AG (ETR:EVK) see €578m decrease in market cap last week, although long-term gains have benefitted them. | |
| Key Insights Given the large stake in the stock by institutions, Evonik Industries' stock price might be vulnerable to their trading decisions A total of 2 investors have a majority stake in the company with 52% ownership Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Every investor in Evonik Industries AG (ETR:EVK) should be aware of the most powerful shareholder groups. With 75% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company. Institutional investors endured the highest losses after the company's market cap fell by €578m last week. Still, the 23% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future. Let's delve deeper into each type of owner of Evonik Industries, beginning with the chart below. Check out our latest analysis for Evonik Industries XTRA:EVK Ownership Breakdown March 26th 2025 What Does The Institutional Ownership Tell Us About Evonik Industries? Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices. Evonik Industries already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Evonik Industries' earnings history below. Of course, the future is what really matters.XTRA:EVK Earnings and Revenue Growth March 26th 2025 Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Evonik Industries. The company's largest shareholder is RAG Foundation, Endowment Arm, with ownership of 47%. Mondrian Investment Partners Limited is the second largest shareholder owning 5.0% of common stock, and BlackRock, Inc. holds about 3.7% of the company stock. To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company. Story Continues Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too. Insider Ownership Of Evonik Industries The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves. Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances. We note our data does not show any board members holding shares, personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here. General Public Ownership The general public-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies. Next Steps: It's always worth thinking about the different groups who own shares in a company. But to understand Evonik Industries better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Evonik Industries you should be aware of. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future. NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 12.03.25 04:35:38 | We Like The Quality Of Evonik Industries' (ETR:EVK) Earnings | |
| Investors signalled that they were pleased with Evonik Industries AG's (ETR:EVK) most recent earnings report. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals. Check out our latest analysis for Evonik Industries XTRA:EVK Earnings and Revenue History March 12th 2025 How Do Unusual Items Influence Profit? To properly understand Evonik Industries' profit results, we need to consider the €242m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Evonik Industries to produce a higher profit next year, all else being equal. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Our Take On Evonik Industries' Profit Performance Unusual items (expenses) detracted from Evonik Industries' earnings over the last year, but we might see an improvement next year. Because of this, we think Evonik Industries' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Evonik Industries as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Evonik Industries, and understanding these should be part of your investment process. Today we've zoomed in on a single data point to better understand the nature of Evonik Industries' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 06.03.25 07:05:29 | Evonik Industries AG (EVKIF) Q4 2024 Earnings Call Highlights: Strong EBITDA Growth and ... |  |
| EBITDA Growth: 25% growth in 2024, supported by recovery in Animal Nutrition and 11% growth in Smart Materials and Specialty Additives. Volume Growth: 4% overall volume growth, with more than 5% in Specialty Additives and Smart Materials. Free Cash Flow: Strong track record with a cash conversion rate of above 40%. Cost Savings: EUR200 million of aggregate gross savings expected by the end of the year from the Tailor Made program. Regional Sales Distribution: 40% Europe, 30% United States, and significant sales in Asia outside of China. Energy Cost Exposure: Less than 5% of total cost is exposed to European energy costs. Future Earnings Growth: Expected further earnings growth in 2025, supported by high double-digit net cost savings and favorable FX effects. Methionine Market Sentiment: Changed from bearish to stable or bullish, especially in China, with better-than-expected first-quarter performance. Warning! GuruFocus has detected 8 Warning Sign with EVKIF. Release Date: March 05, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points Evonik Industries AG (EVKIF) achieved a 25% EBITDA growth in 2024, outperforming its European chemical peers. The company maintained a strong free cash flow with a cash conversion rate above 40%. Evonik is well-prepared for challenges such as weak market growth and high energy costs, with strategic investments in growth areas. The company is implementing a self-help program expected to generate EUR200 million in gross savings by the end of the year. Evonik anticipates further earnings growth in 2025, supported by cost savings, favorable FX effects, and strong performance in key segments like Specialty Additives and Smart Materials. Negative Points The fourth quarter was impacted by several one-time effects, making it difficult to assess the underlying business performance. Despite high free cash flow, net debt remained flat year-over-year, raising questions about cash utilization. The company faces a challenging macroeconomic environment, particularly in its C4 business and parts of Smart Materials. There is uncertainty regarding the impact of potential infrastructure funds in Germany on Evonik's business. The spinout or sale of the Performance Materials segment has been delayed, with no clear timeline for completion. Q & A Highlights Q: Can you provide more details on the growth outlook for Smart Materials and the factors contributing to it? A: Maike Schuh, CFO, explained that the growth outlook for Smart Materials is driven by cost base improvements and attractive growth pockets. The guidance for 2025 includes high double-digit million net savings, lower energy costs, and favorable FX effects. Additionally, the performance of methionine in Nutrition & Care is better than expected, contributing to the positive outlook. Story Continues Q: Why hasn't net debt decreased despite high free cash flow? A: Maike Schuh clarified that the free cash flow does not include leasing costs, which accounts for the discrepancy. When leasing is considered, the net financial debt aligns with expectations. Q: What are the expectations for free cash flow and cash conversion in 2025? A: Maike Schuh stated that they aim to maintain a 40% cash conversion rate. While better operating results and stable CapEx are expected, higher bonus payouts will offset some gains. However, positive net working capital effects provide room for improvement in 2025. Q: How might the German infrastructure fund impact Evonik's business? A: Christian Kullmann, CEO, noted that Evonik could benefit significantly from the proposed EUR500 billion infrastructure fund, particularly in construction, Specialty Additives, and Performance Intermediates. The fund could act as an economic recovery booster for the company. Q: What is the rationale behind the new segment structure? A: Christian Kullmann explained that the restructuring aims to better differentiate business lines focused on customer intimacy and innovation from those focused on asset efficiency. This approach is expected to enhance efficiency, CapEx allocation, and growth potential. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. View Comments |
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| 05.03.25 05:35:24 | Evonik Industries (ETR:EVK) shareholders have lost 4.2% over 3 years, earnings decline likely the culprit | |
| Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Evonik Industries AG (ETR:EVK) shareholders have had that experience, with the share price dropping 19% in three years, versus a market return of about 33%. Since Evonik Industries has shed €296m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics. See our latest analysis for Evonik Industries While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time. During five years of share price growth, Evonik Industries moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too. Given the healthiness of the dividend payments, we doubt that they've concerned the market. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights. You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).XTRA:EVK Earnings and Revenue Growth March 5th 2025 Evonik Industries is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Evonik Industries in this interactivegraph of future profit estimates. What About Dividends? When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Evonik Industries, it has a TSR of -4.2% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments! A Different Perspective Evonik Industries shareholders gained a total return of 15% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Evonik Industries that you should be aware of before investing here. Story Continues But note: Evonik Industries may not be the best stock to buy. So take a peek at this freelist of interesting companies with past earnings growth (and further growth forecast). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 16.10.24 06:16:12 | Evonik Industries AG (ETR:EVK) is a favorite amongst institutional investors who own 70% | |
| Key Insights Given the large stake in the stock by institutions, Evonik Industries' stock price might be vulnerable to their trading decisions The top 2 shareholders own 52% of the company Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business A look at the shareholders of Evonik Industries AG (ETR:EVK) can tell us which group is most powerful. The group holding the most number of shares in the company, around 70% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn). Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait. Let's take a closer look to see what the different types of shareholders can tell us about Evonik Industries. Check out our latest analysis for Evonik Industries ownership-breakdown What Does The Institutional Ownership Tell Us About Evonik Industries? Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices. Evonik Industries already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Evonik Industries' historic earnings and revenue below, but keep in mind there's always more to the story. earnings-and-revenue-growth Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Evonik Industries. RAG Foundation, Endowment Arm is currently the company's largest shareholder with 47% of shares outstanding. With 5.2% and 4.2% of the shares outstanding respectively, Mondrian Investment Partners Limited and BlackRock, Inc. are the second and third largest shareholders. After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions. Story continues While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily. Insider Ownership Of Evonik Industries While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO. I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions. Our data cannot confirm that board members are holding shares personally. Not all jurisdictions have the same rules around disclosing insider ownership, and it is possible we have missed something, here. So you can click here learn more about the CEO. General Public Ownership The general public, who are usually individual investors, hold a 30% stake in Evonik Industries. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders. Next Steps: While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Evonik Industries you should know about. But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future. NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View comments |
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| 24.09.24 05:11:06 | Evonik Industries (ETR:EVK) shareholders have endured a 13% loss from investing in the stock three years ago | |
| These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. In contrast individual stocks will provide a wide range of possible returns, and may fall short. The Evonik Industries AG (ETR:EVK) is such an example; over three years its share price is down 27% versus a marketdecline of 11%. It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that. See our latest analysis for Evonik Industries To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement. We know that Evonik Industries has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time. We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights. You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image). earnings-and-revenue-growth Evonik Industries is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this freechart depicting consensus estimates. What About Dividends? It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Evonik Industries' TSR for the last 3 years was -13%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments! A Different Perspective It's nice to see that Evonik Industries shareholders have received a total shareholder return of 24% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Evonik Industries better, we need to consider many other factors. Even so, be aware that Evonik Industries is showing 1 warning sign in our investment analysis, you should know about... Story continues Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this freelist of companies we expect will grow earnings. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View comments |
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| 12.07.24 12:37:14 | Are Investors Undervaluing Evonik Industries AG (ETR:EVK) By 41%? | |
| Key Insights Evonik Industries' estimated fair value is €32.29 based on 2 Stage Free Cash Flow to Equity Evonik Industries' €18.97 share price signals that it might be 41% undervalued Analyst price target for EVK is €22.24 which is 31% below our fair value estimate Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Evonik Industries AG (ETR:EVK) as an investment opportunity by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Don't get put off by the jargon, the math behind it is actually quite straightforward. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. View our latest analysis for Evonik Industries The Method We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: 10-year free cash flow (FCF) forecast 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (€, Millions) €866.1m €926.0m €804.0m €803.7m €805.1m €807.8m €811.3m €815.4m €820.0m €824.8m Growth Rate Estimate Source Analyst x6 Analyst x4 Analyst x1 Est @ -0.04% Est @ 0.18% Est @ 0.33% Est @ 0.43% Est @ 0.51% Est @ 0.56% Est @ 0.60% Present Value (€, Millions) Discounted @ 5.9% €818 €825 €676 €638 €604 €572 €542 €515 €488 €464 ("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = €6.1b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (0.7%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 5.9%. Story continues Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = €825m× (1 + 0.7%) ÷ (5.9%– 0.7%) = €16b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= €16b÷ ( 1 + 5.9%)10= €8.9b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is €15b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of €19.0, the company appears quite undervalued at a 41% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. dcf The Assumptions We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Evonik Industries as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 5.9%, which is based on a levered beta of 1.140. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. SWOT Analysis for Evonik Industries Strength Debt is not viewed as a risk. Dividend is in the top 25% of dividend payers in the market. Weakness No major weaknesses identified for EVK. Opportunity Expected to breakeven next year. Has sufficient cash runway for more than 3 years based on current free cash flows. Trading below our estimate of fair value by more than 20%. Threat Paying a dividend but company is unprofitable. Moving On: Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price sitting below the intrinsic value? For Evonik Industries, we've compiled three important aspects you should look at: Risks: Every company has them, and we've spotted 1 warning sign for Evonik Industries you should know about. Future Earnings: How does EVK's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. Simply Wall St updates its DCF calculation for every German stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com View comments |
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| 09.07.24 19:33:16 | HPQ Silica Polvere Signs Letter of Intent with Evonik Corporation | |
| HPQ Silica Polvere Signs Letter of Intent with Evonik Corporation | ||
| 18.06.24 05:04:19 | Should You Think About Buying Evonik Industries AG (ETR:EVK) Now? | |
| Evonik Industries AG (ETR:EVK), might not be a large cap stock, but it saw significant share price movement during recent months on the XTRA, rising to highs of €20.71 and falling to the lows of €16.98. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Evonik Industries' current trading price of €18.52 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Evonik Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Evonik Industries What Is Evonik Industries Worth? Good news, investors! Evonik Industries is still a bargain right now. According to our valuation, the intrinsic value for the stock is €26.08, but it is currently trading at €18.52 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Evonik Industries’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market. Can we expect growth from Evonik Industries? earnings-and-revenue-growth Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Evonik Industries, it is expected to deliver a relatively unexciting top-line growth of 8.2% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term. What This Means For You Are you a shareholder? Even though growth is relatively muted, since EVK is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation. Are you a potential investor? If you’ve been keeping an eye on EVK for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EVK. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision. Story continues So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Evonik Industries you should be aware of. If you are no longer interested in Evonik Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com View comments |
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