A Value Investor's Look at Volkswagen AG

At the current market capitalisation of €57bn, scandal tainted Volkswagen is trading at an EV/EBIT ratio of 4.7, completely ignoring a net cash pile and the contribution of the China JV. It is well under 4 times if you add in the Chinese JV and perhaps under 3 if fully adjusted for the cash pile. Various other metrics to note: the PER, which better encapsulates China and any interest on the automotive cash pile, is 5.0x (2014 EPS=€21.90) and 5.5x (2015e Cap IQ); and the stock trades at a discount to book value (about 0.6x BV), despite typically generating low teens returns on equity over the past few years. The question, of course, is how much damage has been done by this disgraceful scandal? Our European analyst, Gareth Brown, has taken a stab at quantifying it (VIEW LINK)