Latest / Warren's Watchlist - english / Rheinmetall - Update 08/28/2026 - ISIN DE0007030009

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Rheinmetall - Update 08/28/2026 - ISIN DE0007030009 · Warren's Watchlist - english

• 0:07
  Speaker 0: A company has orders worth more than eighty billion euros on its books.
• 0:13
  Speaker 0: As of the end June, eight times it's last annual revenue.
• 0:17
  Speaker 0: and yet stock have fallen sharply since start year.
• 0:26
  Speaker 1: What are my missing?
• 0:33
  Speaker 0: The long one is the more interesting.
• 0:39
  Speaker 0: Because neither is new, both were laid out in the twenty-twenty five annual report—the tied up cash as well as risk that a big customer stops placing orders there for anyone to read.
• 0:52
  Speaker 0: But this highly profitable company misses our top mark and it isn't the fallen stock either.
• 1:00
  Speaker 0: A question runs through my entire report How can business be so strong?
• 1:05
  Speaker 0: and leave us in the dark precisely where we look most closely.
• 1:08
  Speaker 1: That sounds like a world-class foundation, with A Few Doors that Stay Locked!
• 1:13
  Speaker 1: For anyone hearing us for the first time I'm talking to Warren Wise an AI technology that analyzes and scores equity stories Like a value investor
• 1:23
  Speaker 0: Exactly...I am a synthetic stakeholder.
• 1:25
  Speaker 0: My thinking And my voice are AI.
• 1:28
  Speaker 0: Today's basis is my report on the Rhinemetal AG annual report for twenty-twenty five.
• 1:34
  Speaker 0: The report was published on March eleventh, Twenty-Twenty six assessed by me using the methodology of Benjamin Graham Warren Buffett and Charlie Munger.
• 1:44
  Speaker 1: And I'm Corey capitol.
• 1:45
  Speaker 1: also AI the voice of retail investors.
• 1:48
  Speaker 1: almost everyone has rine metal On their radar right now and after the rally Of the last few years.
• 1:54
  Speaker 1: many hold the stock to
• 1:56
  Speaker 0: and since we're often asked Every episode is selected, reviewed and approved by a human editorial team.
• 2:02
  Speaker 0: The analysis and the voices are AI—the responsibility is
• 2:06
  Speaker 0: not.".
• 2:06
  Speaker 1: So explain it to me Warren!
• 2:08
  Speaker 1: How can a company run like clockwork operationally?
• 2:11
  Speaker 1: And still miss the top mark?
• 2:13
  Speaker 0: To answer that Corey we're best off starting where Rhine Metal Is Truly Strong —The Business Model... ...and for that forget the tanks & headlines for now.
• 2:22
  Speaker 0: Picture a razor blade business instead.
• 2:25
  Speaker 1: A RAZOR BLADE
• 2:25
  Speaker 1: BUSINESS?!
• 2:26
  Speaker 1: At a defense company, you'll have to explain
• 2:42
  Speaker 0: that.
• 2:44
  Speaker 1: And because the ammunition has to fit this system... ...the customer keeps buying from the same supplier for decades!
• 2:50
  Speaker 1: To switch he'd have to re-equip an entire army
• 2:54
  Speaker 0: Exactly.
• 2:54
  Speaker 0: The switching costs are enormous, the switching risks high and then a second wall comes on top.
• 3:01
  Speaker 0: In Germany only those with estate license may produce weapons of war And there's no legal right to one.
• 3:08
  Speaker 0: The state decides who gets to play at all.
• 3:11
  Speaker 0: A new competitor can neither buy nor sue their way past that hurdle.
• 3:15
  Speaker 1: I see Switching cost plus a licensing hurdle together.
• 3:19
  Speaker 1: That is what you're talking about
• 3:22
  Speaker 0: And you see that moat directly in the numbers.
• 3:24
  Speaker 0: The weapons and ammunition segment runs an operating margin of almost twenty-seven percent, for an industrial business that's exceptionally high—that's almost software
• 3:33
  Speaker 0: territory.".
• 3:34
  Speaker 1: Almost twenty seven cents a profit per euro of revenue?
• 3:38
  Speaker 1: Yes!
• 3:39
  Speaker 1: That really is impressive margin... Twenty-twenty five
• 3:46
  Speaker 0: was a textbook year for Rhine metal.
• 3:48
  Speaker 0: Revenue grew by almost twenty nine percent to nine point nine billion euros, largely under its own power not through acquisitions.
• 3:56
  Speaker 1: Almost thirty percent growth and organic on top of that.
• 4:00
  Speaker 1: That's something to deliver.
• 4:01
  Speaker 1: first What does profit do in a year like?
• 4:04
  Speaker 0: It rises even more strongly By a good thirty two percent.
• 4:08
  Speaker 0: And here is the beautiful part Rhyne metal becomes more profitable with every additional billion in revenue.
• 4:15
  Speaker 0: Costs grow more slowly than the business.
• 4:17
  Speaker 1: Exactly, the leverage of value investor like you looks for Warren?
• 4:21
  Speaker 0: Yes exactly.
• 4:22
  Speaker 0: and if you want to see it a single number return on capital.
• 4:26
  Speaker 0: what the capital employed throws off in profit jumps from around twenty six two over thirty three percent.
• 4:32
  Speaker 1: Thirty-three percent.
• 4:34
  Speaker 1: that's kind of numbers you read twice.
• 4:36
  Speaker 1: make sure didn't misread.
• 4:38
  Speaker 0: And now comes the part that convinces me most as a value investor.
• 4:42
  Speaker 0: Because high profit is one thing, the decisive question whether it turns into real cash?
• 4:48
  Speaker 0: Does reported profit really land money in account or just booking item on paper?
• 4:54
  Speaker 0: At Rhinemetal it lands in the account.
• 4:56
  Speaker 0: operating cash flow was a good two billion euros – Real Cash.
• 5:02
  Speaker 0: And even after Rheinmetall invested heavily in new capacity, a free cash flow of a good one billion is left over.
• 5:08
  Speaker 1: And the balance sheet?
• 5:10
  Speaker 0: It flips completely.
• 5:11
  Speaker 0: in a single year from around €one point three billion of net debt to a net-cash position for completeness –a convertible bond of seven hundred million that turned into equity also helped.
• 5:23
  Speaker 0: but the core of the turn is earned
• 5:25
  Speaker 1: money.
• 5:26
  Speaker 1: The debtor has become a saver and orders aren't drying up either.
• 5:30
  Speaker 0: In twenty-twenty five, for every euro of revenue around two euros of new orders came in.
• 5:36
  Speaker 0: That much planning certainty for the years ahead is rare in capital goods.
• 5:40
  Speaker 1: And how was it today Warren?
• 5:42
  Speaker 1: How has cash flow developed lately?
• 5:44
  Speaker 0: and here you're already at The tipping point Corey.
• 5:47
  Speaker 0: because this very cashflow Was deeply negative in the first half Because they are building up inventory like mad to be able To serve future orders a tall but we have to separate cleanly.
• 5:57
  Speaker 0: those Are Today's numbers.
• 5:59
  Speaker 0: My report judges the twenty-twenty five financial year and even there, The same pattern was in the annual report.
• 6:06
  Speaker 0: The machine is strong but whether the record profit becomes real cash durably that's a truly open question.
• 6:13
  Speaker 1: Honestly up to here this all sounds more like the top mark.
• 6:16
  Speaker 1: Where exactly does Ryan Metal lose the point?
• 6:19
  Speaker 1: Not
• 6:20
  Speaker 0: where everyone is looking.
• 6:21
  Speaker 0: I assess eight dimensions And everywhere it about performance.
• 6:28
  Speaker 0: The money arrives, the balance sheet is clean.
• 6:31
  Speaker 0: Rheinmetall loses the point to very top in three places where company doesn't.
• 6:35
  Speaker 0: let us look-in at customers and research and risks.
• 6:40
  Speaker 0: And on capital deployment there's something more.
• 6:43
  Speaker 0: Rheinmetal is deploying its capital aggressively right now For instance with entry into naval shipyards without disclosing what that supposed bring.
• 6:53
  Speaker 1: But if these three place way so heavily Why doesn't the verdict slide straight to the middle?
• 6:58
  Speaker 0: Because blind spots are something different from findings.
• 7:02
  Speaker 0: My two counterchecks, for contradictions in numbers and typical warning patterns don't trigger.
• 7:08
  Speaker 0: so there's no suspicion only missing visibility.
• 7:11
  Speaker 0: And my scoring does not net strengths or weaknesses against each other.
• 7:15
  Speaker 0: As long as these three doors shut The door of top mark stays shut too.
• 7:21
  Speaker 0: Bottom line a four out five in which the value thesis holds.
• 7:27
  Speaker 1: So a really good rating, and The Three Locked Doors are exactly the distance to the top mark.
• 7:33
  Speaker 0: Very nicely put.
• 7:34
  Speaker 0: And it's exactly at these three doors that It now pays To look one by One.
• 7:39
  Speaker 0: Let start with First.
• 7:41
  Speaker 0: Concentration On the outside of the story is Three segments Broadly positioned The numbers tell A different tale.
• 7:48
  Speaker 0: The weapons and ammunition segment accounts for a good third of revenue, but for over half—namely, fifty-six percent —of the entire operating segment profit.
• 7:57
  Speaker 1: So half the profit hangs on a third of business?
• 8:01
  Speaker 1: That's rather less broadly positioned than it sounds!
• 8:04
  Speaker 0: True... And geographically you see that same pattern….
• 8:07
  Speaker 0: Germany's share of revenue rose to thirty eight per cent in twenty-twenty five plus almost four points in single year.
• 8:14
  Speaker 1: …so the dependence is even growing instead shrinking.
• 8:17
  Speaker 0: Right That's exactly the point.
• 8:19
  Speaker 0: And the largest customer, The German State alone accounts for almost four billion euros in revenue
• 8:25
  Speaker 1: and that closes the circle back to our opening.
• 8:28
  Speaker 1: This very customer just stopped a major frigate program
• 8:32
  Speaker 0: True!
• 8:32
  Speaker 0: And promptly.
• 8:33
  Speaker 0: Rhine Metal had cut its full year guidance by around three hundred million euros.
• 8:38
  Speaker 0: In the blade picture that means A single regular customer alone buys more than one third of all the blades and writes the house rules, too.
• 8:49
  Speaker 0: The same hand that signs the order and grants the export license can also pull the order
• 8:54
  Speaker 0: again."
• 8:55
  Speaker 1: And you just can't swap out a customer like when he gets uncomfortable?
• 8:58
  Speaker 1: Is this why you dock points on transparency as
• 9:01
  Speaker 1: well?".
• 9:01
  Speaker 0: The dependence alone is no verdict—the Order backlog is contractually secured with the state for years!
• 9:07
  Speaker 0: For me, the biggest issue was that next level is missing —how does rest of the customer base break down?
• 9:14
  Speaker 0: A picture of the three largest customers, for example simply doesn't exist.
• 9:18
  Speaker 1: Then let's move to the second door – Warren!
• 9:21
  Speaker 1: Rheinmetall likes to claim technology leadership.
• 9:23
  Speaker 1: Does research deliver on that promise?
• 9:25
  Speaker 0: The company cites a good four hundred million euros of development output for it around four percent of revenue.
• 9:32
  Speaker 0: but guess how much of that rhein-metal itself carries as its own research?
• 9:36
  Speaker 1: Well if you ask like that…three quarters?
• 9:39
  Speaker 0: About half Nearly two hundred million of it is customer-funded contract development.
• 9:44
  Speaker 0: And, if what Rhine Metal carries itself only a good one percent revenue reaches the profit and loss statement For company claiming technology leadership.
• 9:53
  Speaker 0: that's thin... ...and there was second catch how its booked.
• 9:57
  Speaker 1: What do you mean Warren?
• 9:58
  Speaker 0: A growing part of companies own developement costs doesn't land as an expense in the Profit & Loss Statement but is capitalized on balance sheet.
• 10:06
  Speaker 0: In twenty-twenty five that was around one hundred million after just under seventy the year before.
• 10:12
  Speaker 1: So for you, that's a warning sign?
• 10:14
  Speaker 0: Yes absolutely.
• 10:15
  Speaker 0: when you capitalize development costs You put today spending into a drawer labeled investment
• 10:21
  Speaker 1: and That then means this years profit looks nicer as a result.
• 10:25
  Speaker 1: The bill only comes later at some point As depreciation.
• 10:29
  Speaker 1: And they apply This approach of all Years in A record Year.
• 10:34
  Speaker 0: Exactly Corey.
• 10:35
  Speaker 0: To be fair, one has to add they're not researching less on the contrary.
• 10:40
  Speaker 0: But the more of the development costs migrate to the balance sheet The more it flatters the current result.
• 10:47
  Speaker 0: and that's exactly the kind Of detail you have to keep an eye On when it comes to earnings quality.
• 10:52
  Speaker 1: Are there More details of this sort?
• 10:54
  Speaker 0: One more Rhine metal sold a shareholding And left the profit from It.
• 10:58
  Speaker 0: forty six million euros in the operating Result.
• 11:02
  Speaker 0: burdens, by contrast are consistently stripped out as special effects.
• 11:07
  Speaker 1: So what makes the picture nicer stays in?
• 11:10
  Speaker 1: What makes it uglier gets adjusted out.
• 11:12
  Speaker 0: That's exactly the tilt.
• 11:13
  Speaker 0: I mean all legal or disclosed.
• 11:16
  Speaker 0: but anyone reading The Adjusted Margins should know which direction the adjusting goes here.
• 11:21
  Speaker 1: a quick word In our own interest since It fits!
• 11:24
  Speaker 1: What you're hearing is the short version.
• 11:26
  Speaker 1: the full worn wise report checks an equity story across eight dimensions page by page against the annual report.
• 11:34
  Speaker 1: Anyone who wants that view for their own company, on-the-board, The Supervisory Board or in investor relations warren dash wise dot com.
• 11:44
  Speaker 1: so and now back to Ryan metal
• 11:46
  Speaker 0: yes And at the same time two our sharpest finding.
• 11:49
  Speaker 0: first the positive Rhine Metal lists sixteen material risks cleanly each with concrete countermeasures.
• 11:56
  Speaker 0: That's solid craftsmanship.
• 11:58
  Speaker 0: but then comes the decisive question And go ahead, guess again how many of these sixteen risks are also quantified in euros concretely?
• 12:07
  Speaker 1: With sixteen risks half maybe eight.
• 12:10
  Speaker 0: Zero of sixteen at a company with almost ten billion in revenue.
• 12:15
  Speaker 0: not a single corridor no range nothing.
• 12:17
  Speaker 0: and with us the principle holds what isn't disclosed.
• 12:21
  Speaker 0: we don't charitably estimate up We count it as a gap
• 12:25
  Speaker 1: In our blade picture.
• 12:26
  Speaker 1: that's the warehouse they simply won't let us look into.
• 12:29
  Speaker 1: And there was that second thing I noticed, those billion-euro guarantees.
• 12:33
  Speaker 0: Yes at their core commitments to the federal government for a major order.
• 12:38
  Speaker 0: The technical term is letters of comfort.
• 12:40
  Speaker 0: and they more than doubled in a single year To five point seven billion euros.
• 12:45
  Speaker 1: Five point seven Billion That's roughly as much equity... ...and whole things.
• 12:50
  Speaker 1: it completely off balance sheet
• 12:52
  Speaker 0: Industry typical?
• 12:53
  Speaker 0: Sure But its an obligation that swelling strongly and in a world where that same-state customer is cancelling programs right now, as an investor you want to know quite precisely what commitments are actually sitting off the balance sheet.
• 13:06
  Speaker 1: And when you put it all together... What does this mean for your verdict?
• 13:11
  Speaker 0: This is about more than formalities.
• 13:13
  Speaker 0: The foundation is strong No question But I simply cannot check if one of these sixteen risks materializes.
• 13:21
  Speaker 0: The story isn't refuted by that It's unproven.
• 13:25
  Speaker 0: As
• 13:26
  Speaker 1: a shareholder, I mainly see one thing though.
• 13:29
  Speaker 1: The dividend is rising strongly.
• 13:31
  Speaker 1: that surely speaks for the company doesn't it?
• 13:33
  Speaker 0: At first glance yes up forty two percent eleven euros fifty per share.
• 13:38
  Speaker 0: but It also depends crucially on how you calculate.
• 13:41
  Speaker 1: Wait!
• 13:41
  Speaker 1: How You
• 13:42
  Speaker 1: Calculate?!
• 13:43
  Speaker 1: A payout ratio Is a Payout Ratio?
• 13:45
  Speaker 0: Precisely not and That's the catch.
• 13:47
  Speaker 0: if the Company takes its adjusted result as the basis it lands at around forty five percent.
• 13:53
  Speaker 0: If instead you take the group profit that really belongs to shareholders, it's suddenly almost seventy-six.
• 14:00
  Speaker 1: Forty five or seventy six depending on the denominator?
• 14:03
  Speaker 1: That is a huge difference!
• 14:05
  Speaker 0: Indeed and the self set target range was originally thirty-five to forty.
• 14:10
  Speaker 1: And Is that an outlier Or A Direction
• 14:13
  Speaker 0: More direction?
• 14:14
  Speaker 0: In three years The dividend has almost tripled.
• 14:16
  Speaker 0: Earnings per share grew less than half as strongly in same period.
• 14:20
  Speaker 0: The payout is Outrunning the Profit.
• 14:22
  Speaker 1: I get it.
• 14:24
  Speaker 1: At its core, you're not criticizing the level itself but that the basis doesn't stand cleanly alongside it right?
• 14:31
  Speaker 0: Exactly Corey Free cash flow comfortably covers the dividend twice over.
• 14:35
  Speaker 0: That's Not The Issue.
• 14:37
  Speaker 0: If both numbers stood openly side by side i could place It if only one is there You Ask Yourself Why.
• 14:43
  Speaker 1: And There Is One Last Contradiction.
• 14:45
  Speaker 1: You Noticed
• 14:51
  Speaker 0: Vehicle systems, with around half of revenue is by far the largest segment but earns only a good ten percent operating margin.
• 15:00
  Speaker 0: That's less than half what the ammunition division throws
• 15:02
  Speaker 1: off.
• 15:03
  Speaker 1: And here's my big question to management from a retail investors view if your largest segment structurally lags How do you reach your Big Margin target?
• 15:12
  Speaker 1: By twenty thirty?
• 15:13
  Speaker 0: Yes The Target has over twenty percent group margin after all.
• 15:17
  Speaker 0: In my view, either the vehicle division would have to catch up massively or ammunition would become even more dominant.
• 15:24
  Speaker 0: But both would shift profile even further toward concentration – one shouldn't forget that!
• 15:30
  Speaker 0: On top of that… The revenue target is also very ambitious – fifty billion in revenue by twenty-thirty?
• 15:36
  Speaker 0: That'd be more than a fivefold increase.
• 15:40
  Speaker 0: The order backlog gives planning certainty, no question.
• 15:44
  Speaker 0: But every program cancellation like now with the frigates gnaws exactly at the fifty billion
• 15:49
  Speaker 0: target.".
• 15:50
  Speaker 1: And how reliable have such announcements been so far?
• 15:53
  Speaker 0: Mixed.
• 15:54
  Speaker 0: Rhinemetal beat its original guidance for twenty-twenty five —the growth range it raised again in December by contrast—it narrowly missed.
• 16:03
  Speaker 0: Whoever raises the targets also raises the bar and the fifty million will be measured against that too.
• 16:09
  Speaker 0: If the board
• 16:10
  Speaker 1: were sitting here with us, what would it have to answer you?
• 16:13
  Speaker 0: Of the roughly twenty questions in my report at the core.
• 16:16
  Speaker 0: It comes down two three things Corey.
• 16:19
  Speaker 0: first quantify your top risks in euros.
• 16:23
  Speaker 0: zero of sixteen is not a standard that fits your size.
• 16:26
  Speaker 0: second disclose Your Three largest customers and tell us how much of the order backlog hangs on The biggest contracts.
• 16:34
  Speaker 0: And third Name a concrete, dated synergy value for the billion-euro takeover of the naval shipyards.
• 16:40
  Speaker 0: If you deploy capital that aggressively I expect more information
• 16:44
  Speaker 0: here.".
• 16:45
  Speaker 1: Three clear questions and none is an accusation.
• 16:54
  Speaker 1: And now we have to say one thing very clearly precisely because we opened with a crash isn't this?
• 17:00
  Speaker 1: four despite
• 17:04
  Speaker 0: No, and just as little is a weak rating would be a cell signal.
• 17:08
  Speaker 0: That's a methodological limit not a cautious opinion.
• 17:11
  Speaker 0: our score assesses the story.
• 17:13
  Speaker 0: A company tells about its own future And the numbers that have to carry that story.
• 17:18
  Speaker 0: The share price doesn't appear in our report with a single syllable.
• 17:21
  Speaker 1: So In short quality of the equity store checked Price?
• 17:25
  Speaker 1: Not
• 17:26
  Speaker 0: Exactly.
• 17:27
  Speaker 0: An excellent Company can Be a bad stock if you pay too much for it And conversely, a mediocre one can be worth it if its cheap enough.
• 17:35
  Speaker 0: That's precisely why a value investor looks more closely when the quality is checked and price falls – that stock has fallen changes nothing about the four.
• 17:44
  Speaker 1: And what would have to happen for this four move?
• 17:47
  Speaker 1: Up or down?
• 17:48
  Speaker 0: Upward!
• 17:49
  Speaker 0: Concretely quantified risks A disclosed customer structure A soundly justified capital deployment.
• 17:56
  Speaker 0: Then The Four becomes a five.
• 17:58
  Speaker 0: Downward if cash flow tips away durably or the concentration keeps increasing.
• 18:03
  Speaker 1: Before you sum it all up, what do I take with me as an investor into next set of accounts no matter which company is in front of me?
• 18:11
  Speaker 0: I'll give three check rules.
• 18:13
  Speaker 0: first when a company says broadly positioned never look only at revenue but always where profit actually comes from.
• 18:22
  Speaker 0: second arising capitalization rate of all years in a record year is a warning sign for earnings quality.
• 18:30
  Speaker 0: And third, risks that don't stand next to a euro figure you can check.
• 18:35
  Speaker 0: count the silence as a gap not an all
• 18:38
  Speaker 0: clear.".
• 18:52
  Speaker 0: This here is a real money printing machine with the big moat.
• 18:55
  Speaker 0: The razor blade principle plus a licensing hurdle.
• 18:58
  Speaker 0: almost no one clears, A return on capital of over thirty percent doesn't lie.
• 19:03
  Speaker 0: but a strong foundation only becomes top mark when it also shows itself where its gets uncomfortable at risks and customers at capitol deployment.
• 19:13
  Speaker 1: So the fortress stands!
• 19:14
  Speaker 1: The real question is whether they'll ever.
• 19:17
  Speaker 1: let us look behind all walls too.
• 19:19
  Speaker 0: Very apt.
• 19:20
  Speaker 0: If Rheinmetall opens these doors, the four becomes a five.
• 19:24
  Speaker 1: And until then it stays... A world-class foundation with few doors that remain locked!
• 19:30
  Speaker 0: We'll stay on it… Until next.
• 19:32
  Speaker 0: deep dive and if you don't want to miss any company analysis drop by warren-wise.com and subscribe our podcast.
• 19:41
  Speaker 0: I wish your fine rewarding day.
• 19:43
  Speaker 0: always remember be wise when others go crazy.
• 19:48
  Speaker 0: Your Warren Wise.
• 19:51
  Speaker 1: The content of this episode is for general information purposes only.
• 19:58
  Speaker 1: It does not constitute investment advice or a solicitation to buy, hold and sell financial instruments.
• 20:06
  Speaker 1: All assessments are based on model-based AI supported analytical approach.
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  Speaker 1: Warren Wise is fictional synthetic character.
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