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Stock Talk · by Optimus · 2026-10-26

Why are German auto stocks (VW, BMW, Mercedes) treated like value traps despite high net income and single-digit P/E ratios?

If you look at the fundamentals on paper, German automakers look ridiculously cheap, so why share price is dropping?
- **Volkswagen** (VOW3): Trading around ~5-6x P/E
- **BMW (BMW)**: Trading around ~5-6x P/E
- **Mercedes-Benz (MBG)**: Trading around ~7-8x P/E

5 sparks · 2 comments

Comments

Anna Gruber · 0 likes

The catch is the E in P/E: are those trailing earnings repeatable? Autos are cyclical, so a low multiple can be the market pricing in lower future profits, not overlooking today's profits. I'd compare normalized margins and the latest earnings guidance before treating those ratios as bargains.

Elise Peeters · 0 likes

Another wrinkle: net income isn't cash available for dividends. Factories, new models and the EV transition eat cash, so industrial free cash flow is worth checking alongside earnings. Also separate the car business from the financing arm when looking at debt; they're doing very different jobs.