When stocks are plummeting in price, it’s hard to start buying into all the uncertainty. But a disciplined long term investor knows there’s no better time to buy than right now. And I’m not talking about buying into speculative, high-risk stocks. I’m talking about the well-proven, robust track record Siemens Limited. Why? Size. Financial health. Proven performance.
Siemens Limited manufactures and sells electric motors, generators, transformers, electricity distribution and control apparatus, railway locomotives and rolling stock, electric signaling, safety or traffic-control equipment, electronic components, and general purpose machinery in India and internationally. Siemens was established in 1867 and with the company’s market capitalisation at ₹374b, we can put it in the mid-cap group. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.
Having high levels of debt can put pressure on companies during downturns since they have to continuously service their debt payments and interest costs. This means they need to maintain enough cash-on-hand for these expenses as well as maintain a cash cushion for unforeseen circumstances, which can get costly. In Siemens’s case, they have no debt on the books, which eliminates short-term debt pressures highly-levered companies may face. Siemens’s enviable cash position of ₹37b provides it with more than enough liquidity to meet other near-term liabilities, placing it in a financially robust standpoint in the face of uncertainty.
SIEMENS’s profit growth over the previous five years has been positive, with an average annual rate of 32%, outpacing the industry growth rate of 11%. It has also returned an ROE of 11% recently, above the market return of 12%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in Siemens as an investment over the long run.
Next Steps:Based on these three factors, SIEMENS makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy SIEMENS, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for SIEMENS’s future growth? Take a look at our free research report of analyst consensus for SIEMENS’s outlook.
- Valuation: What is SIEMENS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SIEMENS is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.