German secondary stocks: Heie yield bringer: These 10 stocks promise a real price fireworks | message
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by Christian Ingerl, Euro am Sonntag
S.or a year now, the coronavirus has not only dominated our everyday lives, but also the stock exchange. For a long time, investors rushed to the so-called pandemic winners. However, a change of favorites can currently be observed. In demand are now the stocks of cyclically sensitive companies that benefit particularly from an economic recovery. Most investors focus on blue chips. That should be too short-sighted. The DAX is currently rushing from record to record. However, despite the rally of the leading index, small caps show a clear outperformance in the price development.
The companies receive support from economic developments. The International Monetary Fund raised its estimate of global economic growth significantly at its spring meeting. In 2021, the increase should be 6.0 percent, instead of the previously expected 5.5 percent, which would be the highest increase since 1976. For 2022, the experts expect a further expansion in global economic output of 4.4 percent.
Against this background, the experts at the Swiss bank UBS forecast that the rotation into cyclical stocks will continue for the time being. This is an advantage for small caps, because they are often geared towards cycles. In addition, the valuations are still attractive in historical comparison. According to calculations by UBS, the price-to-book ratio (P / B) of the majority of small caps in the MSCI World is well below the long-term average compared to the broad global share index. “We expect that small caps will perform better than large caps,” summarizes UBS strategist Mark Haefele.
There is also a valuation discrepancy between small and large in this country. The SDAX currently has a price / book value ratio of 1.7, the DAX is 2.0 here. The price-earnings ratio (P / E) in the SDAX of 21.3 fIn terms of expected earnings growth, it does not look high either. In 2021, the total winnings of the 70 index members will almost fivefold compared to the previous year. According to estimates, the small caps from the selection index will add another 30 percent in 2022.
A question of size
The size of the company often plays an important role in the growth opportunities. While the large-cap corporations usually find it very difficult to maintain their dynamic expansion from earlier times, the smaller companies are much more agile. “An investment in small caps can offer long-term investors the opportunity to support some of the most successful companies of tomorrow in their development at an early stage,” explains asset manager Yoram Lustig of the investment company T. Rowe Price. But be careful: “Not all small businesses will be successful,” warns Lustig. Therefore, a thorough analysis is required before an investment decision is made in order to determine the future winners.
The second-tier universe offers a large number of companies that are much less known than the big players and are often neglected by the stock market audience. “That is why it probably harbors some hidden treasures,” believes asset manager Lustig.
It is these possible treasures that need to be raised for investors. In the following, uro am Sonntag presents ten promising stocks from the back row of the stock market, which in our opinion have above-average profit potential. As a high return opportunity usually goes hand in hand with a high risk for investors, we advise investors to limit their capital investment.
The IT service provider DATAGROUP is not a newcomer in the corporate world, but has come through many ups and downs in its more than 35 years of existence. Even the corona pandemic could not completely upset the Swabians. Sales in the 2019/2020 financial year (September 30) increased by 16.8 percent. However, higher costs resulted in a slump in profits. The Management Board quickly took measures to improve the earnings situation, which had a positive impact in the first quarter of 2020/21. Operating earnings before interest, taxes, depreciation and amortization (Ebitda) improved by 57.1 percent. In particular, the company’s core product, the modular Corbox complete package, which consists of cloud services and other centralized services, is well received on the market. So the acquisition of new customers is still intact despite Corona. Four new Corbox customers were won from January to March, and another prominent user was added in April with the automotive supplier HELLA.
If the economy picks up, customers’ money will be looser again, which should reinforce the general trend towards outsourcing IT. DATAGROUP boss Max Schaber is already positive in this regard: “We are looking forward to the further course of this financial year with great confidence.” The board of directors expects an increase in sales of around 17 percent and a significant improvement in earnings. There is even a lot of thought about acquisitions: “There are interesting targets in the market, and we are currently examining several possible company takeovers,” says board member Peter Schneck. But even without acquisitions, the increasing digitalization to further boost business.
Conclusion: The sideways movement of the Scale 30 title, which has been going on for around a year, has the best chance of quickly dissolving upwards.
Motor revs up
When the sun rises in the economic sky, the heart of DEUTZ in particular laughs. The engine manufacturer had to cope with significant business losses in the wake of Corona and even canceled the dividend after a year of losses. However, the supplier of diesel, gas and electrified drives is already smelling the morning breeze, as the figures for the final quarter of 2020 and the first quarter of 2021 show.
Not only have sales increased recently, DEUTZ has also received more orders again. From January to March, incoming orders were up 30 percent compared to the previous year. Earnings before interest and taxes (EBIT) also turned positive again.
One of the main pillars of DEUTZ’s growth strategy is the expansion of the high-margin service business. This can already be seen in the 2020 balance sheet. While engine sales stuttered noticeably, revenue from services was kept almost at the previous year’s level. As a result, the share of the service business in consolidated sales rose from 19 to 27 percent. The global efficiency program “Transform for Growth” also ensures that, in the end, more profit remains in the till. Speaking of profit: After a strong start to the year, DEUTZ has raised its sales and earnings forecast. Instead of just a balanced EBIT return, a range between 1.0 and 2.0 percent is now calculated.
With the DEUTZ share you can not only play the economic card, but also invest in future-oriented technologies. Efficient drive systems based on liquefied gas or biogenic fuels as well as emission models based on artificial intelligence underline the high level of innovation of the traditional group.
Conclusion: Improved economic prospects and a high level of innovation speak in favor of the SDAX member.
Ultraviolet (UV) light has been Dr. Hnle. The technology company from Grfelfing near Munich develops, produces and sells UV systems, emitters and measurement technology worldwide. The current business model stands between crisis and boom. On the one hand, the pandemic is dampening demand in individual areas such as the printing machine market; on the other hand, the segment with systems and UV lamps for the disinfection of air and surfaces is showing high growth due to corona. This area was recently strengthened with the acquisition of the Austrian Sterilsystems, which, with its solutions, has declared war on the COVID viruses, among other things. In addition, Dr. Just like UMEX, which has a wide range of products in the field of water disinfection.
It is also thanks to several takeovers that revenues increased by 4.6 percent in the first quarter of the 2020/21 financial year. The Management Board assumes that the positive effects from the business with air disinfection systems will predominate in the future and will lead to a “significant improvement in sales and earnings” on a group basis for the year as a whole. The forecast should also get support from the cyclically sensitive business areas, which should make up ground again if the economy recovers.
Conclusion: The stock is currently showing a favorable P / E of around 15 and is just under a fifth below the annual high. This results in a buying opportunity.
The leading provider of beauty medicine health services in Germany moved into a new league last year. Last summer, for example, Haemato, which specializes in the trade in pharmaceuticals and medical products, was incorporated into M1 clinics. Together, the two have around twice the turnover of the previous M1. In order to give the company the finishing touches, the subsidiary M1 Aesthetics GmbH was brought into Haemato in December, which now shows a clear company structure. While the trade and product business is bundled in Haemato, M1 can focus entirely on beauty treatments.
The beauty operations suffered from the lockdown last year, but the treatment curve quickly turned upwards again. In the third quarter, the number of injections and surgical treatments in Germany increased by almost a fifth compared to the previous year. Internationalization is also advancing despite the pandemic. An additional practice was recently opened in Austria and one in Croatia.
M1 reports on April 27 how the year went. Haemato has already given an insight into its books and was able to increase sales by a fifth. But there was also a disappointment. The board of directors screwed down the sales target for the Covid-19 tests. That made for a strong course setback. Wrong: The basic growth story remains intact.
Conclusion: The consensus assumes that M1 will reach pre-crisis levels this year. Business should grow again in 2022, and the share price should benefit from the prospects.
Focus on profitability
At first glance, Masterflex has everything that an attractive secondary value needs: a healthy equity ratio of over 50 percent, dividend continuity and an attractive price-earnings ratio of around 13 based on the profits expected for 2022. Nevertheless, the small cap is not moving, on the contrary: over a three-year period, the share is even around a fifth in the bad. One reason for the underperformance is likely to be the weak earnings trend in recent years. While sales rose steadily, Masterflex missed its own margin targets several times.
But that should now be the end of it. “With an improved financial situation despite the recession, we can look to the current year with confidence, in which we will hopefully return to our growth path if the infection situation normalizes,” says CEO Andreas Bastin. The CEO also has high hopes for the cost reduction and efficiency enhancement program with the telling name “Back to Double Digit”. With this, Bastin wants to achieve a double-digit EBIT margin again in the coming year and then maintain it. For comparison: in 2020 the return fell from 6.3 to 4.4 percent.
Masterflex even dares to look ahead over the longer term. In terms of sales, the Management Board expects an increase in the three-digit million range by 2024. Last year, the specialist in flexible connection systems for numerous industries such as medical technology, automotive and robotics only achieved proceeds of just under 72 million euros. As if that weren’t enough, based on the year 2024, with the help of acquisitions, a doubling of sales to 200 million euros is on the medium-term plan by 2030.
Conclusion: In the course of increasing profitability, the share should gradually wake up from its slumber.
The Medios share experienced a true rollercoaster ride in its recent past. In the wake of the Corona crash in spring 2020, the SDAX stock first went down steeply, shortly afterwards it hit a new high. The title then went through a comparable up and down movement in the summer after a profit warning. Since then, the price has moved in a sideways range between 35 and 40 euros.
So it is high time to take a closer look at the supplier of drugs for chronic and rare diseases. With a sales growth of 21 percent to 626 million euros, the Berlin-based company reached the upper end of the forecast range last year. The operating result also met expectations at 14.8 million euros. However, this corresponds to a decrease of 16 percent compared to the previous year. In the future, the profit curve should point upwards again. Medios has published a strong growth forecast for 2021. Sales will almost double in the current year to 1.15 to 1.2 billion euros and the adjusted operating result (Ebitda) will reach a value between 38 and 39 million euros. This corresponds to an increase in earnings of up to 159 percent.
The main growth drivers are the takeover of Cranach Pharma, which was completed in January, and the acquisition of Klsche Blister 2020. This means that Medios is not only much broader, but can also use numerous synergy effects in purchasing, sales and logistics. Further acquisitions cannot be ruled out.
The share recently received an accolade from Deutsche Bank. The Frankfurt-based company has started coverage of the specialty pharmaceutical company with a buy recommendation and a price target of 50 euros.
Conclusion: The current consolidation of the stock offers a good entry opportunity.
One of the big issues of our time is cloud computing. The outsourcing of digital data or the use of software on external servers is becoming more and more common. Then why not make calls in the data cloud? Munich-based NFON asked itself this question many years ago and has been offering cloud-based communication systems since it was founded in 2007. Bavaria currently has more than 40,000 companies in 15 European countries among its customers.
The fact that the technology is becoming more and more prevalent on the market can be seen in NFON’s books. In 2020, the number of extensions installed by customers, known as seats in technical jargon, rose by 16.7 percent to just under 525,000. Recurring sales, which now account for almost 88 percent of total revenues, even increased by 23.6 percent to 59.4 million euros. In 2021, NFON would like to continue to get started with its cloud-based product portfolio in the European market for business communication and is aiming for seat growth of between 15 and 17 percent and an increase in recurring revenues of between 14 and 16 percent.
The “Growth Strategy 2024” is intended to ensure that NFON remains on the road to success. In addition, the management announced on the youngest capital market that it would also address larger customers in the future. In addition, the company wants to promote internationalization and is primarily focusing on Central and Eastern Europe. Berenberg analysts believe in the strategy and forecast an average increase in recurring sales of 23 percent between 2020 and 2023. For comparison: the competition should only advance by 13 percent.
Conclusion: NFON’s growth story is intact. The current price setback offers an excellent buying opportunity.
Mobility restrictions and contact bans made life difficult for Sixt Leasing last year. The specialist for the online direct sales of new vehicles in Germany as well as for the management and full-service leasing of large fleets had to cope with a drop in sales of almost a tenth. The profit fell by 90 percent. However, the company has set a number of levers in motion to get out of the misery. On the one hand, Sixt Leasing relies on digitization. This not only affects the existing products, services and internal processes, the company also launched a new fleet customer app in the first quarter. On the other hand, the ordering process for private customers has been completely digitized on the company’s own platform. Sixt also started a new cooperation with Lidl and Vehiculum to market new cars on the Internet. The business model is also to be expanded to include used car leasing.
With the operational innovations, the increasing relaxation of the pandemic measures and the improving economic outlook, business could pick up speed again in the current year. The new boss Donglim Shin, who will replace the current CEO Michael Ruhl on July 1, should also bring a breath of fresh air to the car leasing group. Shin was most recently CEO of Hyundai Capital Canada, where he was a key driver of business growth in the auto leasing and financing sector. So far, Sixt expects revenues and profits for this year to be roughly on par with the previous year. In our opinion, the conservative forecast holds positive potential for surprises.
Conclusion: The share price has been stuttering for months. In the course of an expected upturn in business in the second half of the year, Sixt Leasing should pick up speed again.
Admittedly, Vectron board member Thomas Stmmler has promised a lot in the past, but has not always been able to keep all of his goals. Last year, the provider of cash register systems and software once again missed the forecast in terms of profit. According to preliminary figures, the company will have an Ebitda minus of 2.2 million euros in 2020, which means that Stmmler just missed the range of minus 2.0 to plus 0.25 million euros that had been promised.
Nevertheless: Operationally, the company, which can now have more than 240,000 installations of its cash register systems, is doing comparatively well despite the Corona crisis. After the Ebitda loss in 2020, the people of Münster are expecting black numbers for the first quarter of 2021. The positive trend could even accelerate in the course of the year through a gradual reopening of the catering trade.
Additional imagination comes from a new Datev interface that is currently being rolled out. This automatically transfers the data from the cash register systems to the Datev cash archive. In addition, the subsidiary Bonvito is to be merged into the Vectron Group this year. Bonvito has a cloud-based customer loyalty system that offers enormous growth opportunities. Only in December was a major order signed with one of the largest German bakery chains. The deal will be reflected in the 2020 numbers.
Conclusion: The Vectron share offers good comeback chances. Attention: The title is highly volatile and therefore only suitable for risk-experienced investors.
The pandemic hardly stopped at an industry, and even Germany’s favorite child, the car, often remained dirty during lockdown. The manufacturer of car wash systems had to post a drop in sales of around 13 percent last year. WashTec’s EBIT fell by as much as 44 percent. But that’s the end of it: In 2021, the group is planning to increase earnings again. While the company’s outlook was still cautious at the beginning of the year, the management board has now been significantly more optimistic this week. Compared to the previous year, sales should not only develop stably, as previously assumed, but rather increase by more than five percent. The same goes for the eBit. In addition, WashTec continues to work on increasing profitability in order to achieve a double-digit operating return in the medium term.
According to the management, the major customers area in particular has recently developed better than expected and has led to the latest forecast increase. But that doesn’t have to be the last target increase this year. A rapid economic recovery could give customers a further boost to their willingness to invest and ensure an even better course of business than previously expected.
The dividend policy shows that the management is fundamentally confident. After a zero round in the previous year, the company is proposing a distribution of EUR 0.99 per share. But that’s not all: In addition, a special dividend of EUR 1.31 per share is to be paid out to shareholders on the day after the Annual General Meeting (May 18, 2021). This results in an attractive return of 4.6 percent.
Conclusion: The share recently took a breather. The current forecast increase could help the title get going again.
Secondary stocks VS. DAX
Everyone is currently talking about the record rally of the DAX. But it is not just the blue chips that are rising, the second-tier stocks are even moving at an even faster pace. With an increase of 58 percent over the year, the SDAX is 14 percentage points ahead of the DAX. The Scale 30 raced up 77 percent.
After the Corona year, the profits for mid and small caps turn up significantly. Many companies are showing surprisingly strong dynamics, especially in the SDAX. Analysts believe that eleven of the 70 SDAX members will achieve growth of over 50 percent, while eight could achieve a three-digit increase.
The analysts’ consensus expects the second and third series of exchanges to see significant increases in profit amounts over the next two years. In the SDAX, the profits of all members should almost quintuple in the current year. The companies in the MDAX and Scale 30 will also add more than a fifth on average in 2021.
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