Jenoptik – German technology

Jenoptik is a German company that manufactures and sells photonic devices. Explaining what Jenoptik does in a simple way is a complex task, as the group produces a large range of products and serves different markets.

It is divided in five divisions:

  • Optical Systems;
  • Healthcare and Industry;
  • Automotive;
  • Traffic Solutions;
  • Defense and Civil Systems.

Another way to summarize its business is to look at the industries of its primary customers, which are the following:

  • Semiconductor;
  • Healthcare technology;
  • Security and defense;
  • Mobility;
  • Automotive.

Jenoptik history

The group has a long and interesting history that can be traced to the foundation of Carl Zeiss AG in Jena in 1846. Moreover, its evolution was affected by the Soviet occupation of Germany during the years that followed World War II. The group was officially founded in 1991, is now listed in the Frankfurt Stock Exchange, and is a component of the TecDax index.

Jenoptik financials

As we can see from the chart above, the most important target market by revenue is “automotive and machine construction.” I am not surprised given we are talking about a German company. Regardless, Jenoptik is quite diversified and therefore a stable company that can cope with the difficulties of a specific industry relying on the other ones.

In the last few years it has shown steady growth, partially slowed by the aftermath of the 2007 recession.

The group’s revenue are mainly concentrated in Europe. As we can see below, less than 62% of all sales are being made in Germany; the rest in Europe.

Jenoptik stock price

If we compare Jenoptik’s stock to its natural benchmark, the TecDAX, we notice that in the last two years it outperformed the index. This proves the company is producing above-average performances that are recognized by the market with higher stock returns. In the months that followed the election of the new president of the United States, European stock markets followed the good performance of the U.S. indexes (Dow Jones, S&P 500 and Nasdaq) that hit their historical highs more than once. This has also contributed to the growth of the Jenoptik stock in the last few months.

Jenoptik EPS and dividends

As the chart below shows, EPS have risen since the 2009 drop in response to the world recession. This is obviously a positive sign and shows management’s ability to deliver good results. But as we know, some shareholders are very interested in how much EPS translates into DPS. The group has paid out dividends since 2012, and from that point on has managed to keep them steady over the years. Shareholders are surely happy about this. But at the same time, we notice that the payout ratio is, on average, below 0.25. This may be due to the fact that there are not shareholders with a controlling stake that influence the dividend policy, but instead most of the shares are held by investment funds or represent the free-float.

Conclusions

Management makes decisions in service of long-term goals. In fact, it takes into consideration the so-called “megatrends” that are developing in the industries the company is involved in. The focus on growing internationally and the large diversification of products make the group very solid in case of financial crisis. The high margins of the income statement show the ability to produce high-quality products and innovate in a consistent manner. Jenoptik has a successful history that is intertwined with that of post-war Germany. Since it has consistently shown an ability to produce value for its shareholders, it deserves to be put in the watch-list for all investors interested in European mid-caps with good future prospects.

Would you invest in Jenoptik?

Let me know in the comments below.

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