Volkswagen Group also has a large financial services business with the following services.
Volkswagen Group’s financial services division operates a s bank and creates an extra level of complexity when considering a value analysis. Assets for a bank are loans made to customers. The assets are not physical assets and have risk if the recipient of the loan cannot pay interest or capital. The financial assets owned by the Financial Services division may not be the type of assets that a defensive value investor would want to own. Therefore, defensive value investors will want extra protection in the form pot a low price or conservative financing structures before making an investment.
In the 2019 Annual report Volkswagen put €2,3 billion of legal expenses in the costs part of the income statement. These costs relate to the fines or potential fines relating to the diesel engine testing problem that appeared in 2015. Investors can expect legal expenses to accrue in the income statement for this issue for the next 2-3 years. Once this issue has been resolved by payment of fines or other means, investors can expect reported earnings to rise.
The question for value investors is to consider whiter the current share price makes Volkswagen common shares cheap enough to consider an investment. The Volkswagen share price is down with many others at the moment.
You can see the price decline in the chart below.
As a result of the recent price decline it is possible that Volkswagen common stock is currently cheap enough to create a reasonable investment opportunity for value investors.
In order to find out why Volkswagen represents good value at the current price download the individual report here
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