And so it ends. Today, we wrap up our five-part series on German American Depositary Receipts (ADRs) trading on U.S. stock exchanges.
What a long, depressing trip it's been.
We've toured Germany's old economy, its banks and insurers, its natural-gas suppliers and chemical stirrer-uppers -- and we've found, for the most part, stagnant earnings growth and high equity prices. We've taken a microscope to German semiconductors and found a surprising dearth of profits, in contrast to the earnings strength evident in their American counterparts. Finally, yesterday, we looked at the country's health-care sector -- finding one fairly priced dialysis provider and two pharmas whose income statements could use a bit of intensive care themselves.
Now, we'll polish off the company's ADR offerings with a quick trip through the remainder of the high-tech sector. We'll look at biotech, telecom, software, and electronic gadgets. That's right, folks -- look sharp, because today's the last time (for a while, at least) that we'll be .
Getting to know this country
(Level II ADR) 1 ADR = 1 Common Share
What's in a name? The first line above tells you essentially all you need to know about GPC Biotech
Sorry. Cheap shots both, I know, but in GPC's case, it's true. The company, whose name refers to the initials of its previous corporate name, "Genome Pharmaceuticals Corporation," burned through about $130 million worth of free cash flow from 2000 through 2005, and its rate of cash burn is accelerating. That situation may change soon, since the company does have one drug, satraplatin, in a phase 3 trial for the treatment of prostate cancer. Or it may not -- GPC has two other cancer-drug candidates working their way through the regulatory process, and they're burning up cash along the way.
The good news is that GPC also has a stack of cash piled up that should suffice to cover its operations for the next three years at the current burn rate. The bad news -- you never know whether a biotech is going to hit it big or just burn out.
Or, rather, I never know. The Fool's resident biotech analyst, Charly Travers, has a much better feel for these kinds of things. If you're a subscriber to Motley Fool Rule Breakers, or if you even just want to give the service a try for one free month, you can post a note on the Rule Breakers discussion boards and get quick feedback from Charly and the other Rule Breaking Fools on GPC's prospects for greatness.
(Level III ADR) 1 ADR = 1 Common Share
Now we turn to the big names in corporate Germany. Everyone knows Deutsche Telekom
The company that's so popular among global business travelers also looks attractively priced relative to its competitors. It sports a P/E of 8.2, yet analysts expect it to grow its earnings at 9.1% per annum over the next five years. That's nowhere near the explosive growth that analysts expect to see at next-door neighbor and Motley Fool Income Investor pick France Telecom
Combine that favorable valuation with Deutsche Telekom's generous dividend payouts (the stock yields 4.6%), and Deutsche Telekom deserves a look from globetrotting income investors looking to diversify away from an overvalued dollar.
(Level II ADR) 1 ADR = 1 Common Share
Thanks to the company's U.S. ADR program, you can easily buy yourself a piece of the Siemens action, but it won't come cheap. The company's shares currently change hands for a whopping 34 times trailing earnings. That looks like a pretty steep price to pay given that analysts expect Siemens to grow its profits at only 7% per annum in the long term, and even with foreign analysts calling for 22% growth in profits next year, 34 times earnings looks a bit on the pricey side.
From a U.S. investor's perspective, I'd be much more inclined to invest with local hero GE. At 24 times trailing earnings and with 11% growth projected, this firm is no bargain, but it is cheaper, and GE's 3% dividend trumps Siemens' 1.8% to boot.
(Level II ADR) 1 ADR = 0.25 Common Share
If you're a buyer of BMWs and Hugo Boss suits -- if, in other words, you just have to overpay for quality and view a 30-odd times multiple to earnings as a mark of distinction rather than as a ridiculously large price tag, then SAP
The software maker also sports software maker-like margins: 27% operating and 18% net, which are not too far behind rivals Microsoft
In short, SAP is an excellent business -- with a price tag to match. Buy at your own risk, and pray the company never misses an earnings target.
And there you have it. Eighteen German ADRs for the taking. Not all of them are necessarily worth taking, but I hope this series has helped to highlight the few German companies that are worth taking a look at, for your future due-diligence delight.
For more coverage on Germany and the Olympics:
Fool contributor Rich Smith does not own shares of any company named above.