Growth driven by war in Ukraine

Rheinmetall AG (RHM) specializes in the design, manufacture and marketing of equipment, components and solutions for the military and civilian industries.

The company recently told the Rheinische Post newspaper earlier this year that it hoped to open a €200 million battle tank factory on Ukrainian soil, capable of producing about 400 tanks a year.

At the end of 2022, the Group had 132 production sites worldwide. Net sales are distributed geographically as follows: Germany (29.5%), Europe (35.7%), Asia and Middle East (16.3%), Americas (9%) and other (9.5%). At time of this writing

Number of employees: 22,640

Rheinmetall net sales by product family:

Vehicle systems (35.1%): multi-purpose wheeled and tracked vehicles (tactical military vehicles, support vehicles, logistics vehicles and special vehicles).

Sensors and actuators (20.5%): actuators, exhaust gas recirculation systems, throttle valves, exhaust gas dampers for electric motors, solenoid valves, pumps, etc. used in thermal and fluid management applications in the mobility and industrial sectors.

Weapon and ammunition systems (19.5%): automatic cannons for land, air and sea vehicles, smooth-bore weapons, artillery systems, smart projectiles, high-energy lasers, etc.

Electronic solutions (13%): sensors and networking systems, cyberspace protection solutions, air defense systems, radar systems, technical documentation solutions, integrated electronic systems, drones and automated ground robots, training and simulation solutions.

Engine components and systems (11.6%).

Stellar key indicators

In the past year, RHM enjoyed positive earnings. More specifically, RHM had positive earnings in 4 of the past 5 years. Additionally, RHM had a positive operating cash flow in each of the past 5 years.

Rheinmetall has seen its revenue grow by 14.75% yearly with revenue growth rate showing an accelerating rate.

Last year, RHM also shows a strong growth in Earnings Per Share (EPS). Furthermore, the EPS has been growing by 70.70%, which is quite impressive. The Earnings Per Share is expected to increase by 27.58% on average over the next years. [1] The largest shareholder of Rheinmetall is Wellington Management Group LLP with 5.1% of shares outstanding.

On the level of operations, in the past year RHM had a positive cash flow.

RHM's return on equity of 16.87% is on solid ground compared to the rest of the industry.

In this field, RHM outperforms 62.86% of its industry peers. Additionally, the return on invested capital of RHM (10.03%) is better than 74.29% of its industry peers. The Operating Margin of RHM (11.29%) is better than 80.00% of its industry peers. RHM has a Debt/Equity ratio of 0.56. This is a neutral value indicating RHM is somewhat dependent on debt financing. However, a current liquidity ratio of 1.61 indicates that RHM should not have problems meeting its short-term obligations.

Conclusion:

Based on analyst consensus, the company is a strong buy. Based on 12-month price targets for Rheinmetall in the last 3 months, the average price target is €291.75 with a high forecast of €322.00 and a low forecast of €233.00. [2] The average price target represents a 14.03% change from the last price of €255.85. [3]

Performance of Rheinmetall stock over the past 5 years. Source: Tradingview.com *

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Adam Austera, chief analyst of Ozios

* Past performance is no guarantee of future results.

[1,2,3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.