When you think of German reliability, you might think of companies like BMW or Mercedes. But there was another player quietly making big moves: Rheinmetall AG. In Düsseldorf, close to the famous Königsallee, this company worked silently on advanced tanks and clever car technology. What does this mean for you as an investor?
What makes Rheinmetall so special?
Imagine this: you walk through a neighbourhood like Oberbilk, where you can almost smell the Rheinmetall factory. Here, thousands of people work on armoured vehicles for NATO countries and parts for electric cars. That unique mix of defence and car innovation gave Rheinmetall a solid head start.
Maybe you wondered: “Can one company really handle both markets?” Rheinmetall proves it every day. Where other companies only made weapons or only made car parts, Rheinmetall simply did both. This resulted in long, stable contracts with governments and car brands.
Strong growth through defence
You hear it everywhere: due to the war in Ukraine and new NATO plans, European countries are spending more on their armies. Rheinmetall supplies tanks, ammunition, and even air defence that other companies cannot make. The company had a full order book and ranked among the three largest defence suppliers in Europe.
Recently, Rheinmetall received multi-billion contracts from the German government. Other countries lined up as well. Result: the turnover of the defence branch grew double digits over the last five years. Margins are high, because this technology is unique.
Innovation in the car industry
Do you know the roundabout at Flingern? More and more electric cars are passing there. Rheinmetall supplies smart, clean parts to the biggest car brands. The automotive branch was under pressure for a while due to the rise of electric driving, but Rheinmetall quickly switched to new e-mobility parts.
This kept turnover stable, while many competitors struggled. Smart, right?
How healthy is Rheinmetall financially?
The cash sometimes almost spilled out of the coffers. Rheinmetall often received advance payments on big defence orders. This kept the company financially strong, even when a lot was invested in new inventions.
Latest figures:
- Revenue growth (2023): +18%
- Net profit (2023): €1.1 billion
- Gross margin: 27%
- Net margin: 10%
- Return on Equity: 14%
- Debt-to-equity: 0.5
- Free cash flow remains positive
Source: Rheinmetall Annual Report 2023 .
Management and shareholders
You may know Armin Papperger, Rheinmetall’s CEO. He is known as reliable and innovative. The dividend grew steadily and in profitable years the company bought back shares. As a shareholder, you felt the profits directly in your pocket.
How is the stock valued?
Imagine standing on the trading floor in Frankfurt. You look at the board: the price-earnings ratio is around 16, a bit higher than its historical average but lower than many defence peers. The price-to-book value is at 2.3. Dividend yield: about 2%.
Rheinmetall has solid price potential, especially now that the order book keeps growing.
What do analysts say?
Most banks in Frankfurt and Amsterdam gave the stock a buy rating. Investors responded positively to every new contract. The share price rose sharply after new NATO orders were announced. Sentiment remained mixed around the automotive branch, as it is more sensitive to economic swings.
Risks for investors
Rheinmetall is highly dependent on government contracts. If a government cuts budgets or export rules change, that can hurt. The car industry remains challenging due to price pressure and competition from Asia.
But the defence division kept growing last year, even with geopolitical tensions.
Is Rheinmetall a buy?
My opinion: Rheinmetall was and is a growth stock with a stable dividend. The defence branch is growing thanks to geopolitical tensions. The automotive branch is stable, as long as innovation stays at the forefront.
Want to diversify? Rheinmetall fits perfectly in a portfolio as a hedge against uncertainty in Europe. Don’t forget to check the quarterly figures and order book.
Summary
Rheinmetall has become a strong European player, especially thanks to the defence branch. Innovations in automotive keep the company future-proof. The solid financial base and rising dividend make the stock attractive for the long term.
Are you ready to add Rheinmetall to your portfolio? Or are you waiting for a correction? Let us know in the comments!
