Wirecard: Key figures extremely
I used to wonder why the market was willing to pay a price-to-earnings ratio (P / E) of almost 100 and a price-to-sales ratio (KUV) of over 10. Today the world is upside down. Stock exchange portals have a 2019 profit of EUR 3.90 per share, which results in a P / E ratio of 0.5 if the price is not EUR 2.
For many of Wirecard’s competitors, the P / E ratio is still above 50. However, these profits are – probably – real. Wirecard, on the other hand, was a lot of fake. Nobody should use their previous profit statements as the basis for an investment. And yet it might be interesting to think about it for a moment.
After all, nobody actually doubts that Wirecard has actually been a serious competitor for the payment service providers, which continue to be valued as expensive. The large developer team and the busy business development really existed. So I don’t think it is very far fetched for Wirecard’s shrinking business segments to operate profitably on the market and thus also achieve a good price in the current breakdown.
Different scenarios are possible
In many cases, bankruptcy means that everything is gone for shareholders and creditors either share the proceeds among themselves or become owners. In a medium-sized company, an insolvency administrator usually knows very quickly what is going on. Then a continuation concept is discussed and if this fails, the assets are auctioned off.
At Wirecard, everything is a few steps more complicated. We are dealing with foreign subsidiaries that are difficult to assess, unclear balance sheet relationships, legal proceedings, widely ramified business relationships and the Wirecard Bank, which has been spared from the bankruptcy proceedings. How much can be redeemed over the next few quarters is in the stars. If equity is kept above zero, the company could continue to exist in one form or another and a total loss for shareholders could be averted.
Optimally, the proceeds of the parts currently for sale already add up to a value that can be used to service creditors. Then the shareholders would still own the Wirecard Bank, including the ambitious mobile bank boon.PLANET. The chance of this currently costs EUR 240 million on the stock exchange. As a reminder: The rapidly expanding app bank N26 was last valued at around 3 billion euros.
It remains exciting
When I look at the Wirecard, two hearts beat in me. One is loathsome of the fraudulent activities of management, while the other has great respect for the development efforts of programmers and project managers. I would find it desirable that the diverse solutions – for good money – find a new home where the potential can unfold seriously.
However, the fact that the 2024 bond is currently trading at around 13% suggests that creditors also expect significant losses. Even if one would expect a return of 25% per year in view of the high risks, this rate implies that almost 70% of the receivables must be written off.
The bond market apparently has little confidence in the insolvency administrator’s sales skills – or he expects that further irregularities and accrued losses will tear even bigger holes in the balance sheet. He also thinks it is out of the question that even larger sums of money can be brought in through the lawsuit.
Is there too much pessimism about the bond here? Or are the shareholders too optimistic? I don’t want to make up my mind yet. In the end, it could be details that make the difference.
The post Wirecard is trading at a P / E ratio of 0.5 – is that attractive now? appeared first on The Motley Fool Germany.
Motley Fool Deutschland 2020