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V-Zug’s share in a crash: this growth story is your chance to earn a 30% return

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Critical Woman ETF

Of course v train (WKN: A0VZUG) cannot escape the current turbulence in the equity markets. In the last six months, the share price has plummeted 23%. Today we can get the paper for just 105.00 Swiss francs (as of March 16, 2022). The share price is now almost 32% below the all-time high in August 2021. The price-earnings ratio is only 10.3.

That’s crazy! Because V-Zug is a really strong company with a solid balance sheet and a history of growth. I don’t know about you, but I’m seriously thinking about investing. The reasons for that are obvious.

V-Zug had an excellent financial year 2021

The kitchen appliance maker increased its sales by almost 10% to 623.7 million Swiss francs. Things went particularly well in the Swiss domestic market: growth was over 5%. In previous years, we have often experienced gridlock here.

Internationally, too, business ran like clockwork. The signs point to expansion. Sales here rose 40.5% to 94.6 million Swiss francs. The additional showrooms are likely to further increase brand awareness and sales figures. V-Zug intends to open new locations in Paris, Sydney and Vienna in the current fiscal year 2022.

The company managed to increase EBIT by 27.5% to 62.7 million Swiss francs. With 10% for the year as a whole, the Board of Directors has for the first time achieved the medium-term target of a declared double-digit EBIT margin at the time of the IPO in 2020.

v train

v train

V-Zug had problems with margins in the second half of the year

Starting in the summer of 2021, higher material prices and chip shortages will weigh on the margin. This fell from 12.4% in the first to 7.7% in the second half of the year. But no problem: the net profit finally amounted to 55.4 million Swiss francs. This is an increase of 28.3% compared to the previous year. However, there is no dividend. The leadership around CEO Peter Spirig prefers to focus on global expansion. And that is expensive.

But V-Zug has the necessary base for it. The company is virtually debt free. Current assets are twice current liabilities. And operating expenses have been stable for years at around 35% of sales. The mountain of cash currently weighs around 95 million Swiss francs. This gives V-Zug enough power for new projects.

This is where the music of growth plays.

Let’s turn to the forecast: for the current fiscal year, Spirig and his colleagues expect sales growth of more than 6%. There is uncertainty regarding supply chains and purchase prices for materials. Despite all the obstacles, the EBIT margin should return to at least 10%.

And in the long term? The company aims to report annual organic revenue growth of 3% through 2026. International markets are expected to grow organically by more than 10%. The EBIT margin must be between 10 and 13%.

V-Zug shares look interesting

I am satisfied with V-Zug. The kitchen appliance maker did well in 2021 and achieved some of its mid-term goals even faster than it thought. So far, my investment thesis has worked perfectly. I am happy about the revived business in Switzerland.

International expansion remains particularly exciting – there is still a lot of potential here. After all, in many respects the products represent exactly the qualities for which Switzerland is internationally known.

Not only the P/U shows it clearly. The market doesn’t really recognize the potential of V-Zug. I believe that at the current price a medium-term return of 30% is possible. Apart from this part, V-Zug is currently one of my favorites in Switzerland.

The article V-Zug shares plunge: This growth story is your chance to earn a 30% return, first appeared in The Motley Fool Germany.

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Henning Lindhoff does not own any of the aforementioned shares. The Motley Fool recommends V-Zug.

Motley Fool Germany 2022

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