We recently compiled a list of the 10 Best German Stocks To Buy Now. In this article, we are going to take a look at where Evotec SE (NASDAQ:EVO) stands against the other German stocks.
In Germany, the economic growth is based on industry. According to Deutschland.de, Germany’s manufacturing industry contributed 26.6% to the country’s gross value in 2021. In contrast, the percentages were 16.8% in France, 18.4% in the USA, and 29% in Japan. Moreover, in 2020, manufacturing companies generated 2,096 billion euros (approximately $2.2 trillion) in revenue. The largest contributor, at 459 billion euros ($485.3 billion), was the automotive market.
According to the aforementioned research report, the manufacturing market’s export ratio in 2021 was 48.4%. Motor cars and motor vehicle parts were Germany’s most important export products in 2022, totaling 244.4 billion euros ($258.4 billion) and accounting for 15.5% of German exports, as in previous years. In this calculation, it is the value of the finished car counts, even though many parts are imported from other countries.
As per Torsten Schrimpf, Partner and International Business Centre Director at Grant Thornton in Germany, the key growth sectors in the country at present include healthcare and medical devices, plastics, and fintech. He claims that there has been an influx of financial services companies over the past few years as a result of Brexit, with many businesses setting up entities in the country or moving away from London entirely.
Nonetheless, currently, the stock market in Germany is under a lot of strain as economic sentiment weakens. The ZEW index dropped rapidly from 13.1 in October to 7.1 in November, falling far short of the 25-point one-year average. Indicating declining confidence among financial specialists, the index measuring the state of the economy also fell by 4.5 points to -91.4. Achim Wambach, a president of ZEW, commented that Germany’s economic sentiment reflects ongoing concerns about trade and political risks, especially in light of recent events in the US. These drops mark a resurgence of worries about rising tariffs and possible trade obstacles affecting European exports in the wake of Donald Trump’s victory as president of the United States. On November 5, 2024, the German DAX index fell by 0.7% in morning trading, confirming this pessimism. The euro also dropped by 0.4% versus the US dollar to a seven-month low of about 1.06, which was made worse by estimates of a stronger dollar due to Trump’s proposed trade policies.
Following Donald Trump’s presidential victory, analysts at Citigroup and ING have voiced a cautious and pessimistic outlook for Germany’s economy. According to Citigroup analysts, Donald Trump’s victory could have a negative impact on German banks because of possible adjustments to interest rates, tariffs, and U.S. financial deregulation. ING analysts also emphasized that auto tariffs might have a “particularly hard hit” on the German economy, which is highly dependent on trade with the U.S. In light of Trump’s critical views on NATO and the Ukraine crisis, this could increase economic uncertainty and erode trust metrics. ING cautioned that while tariffs would not be implemented right away, heightened concerns about trade conflicts might force Germany and the rest of the eurozone into a recession by the end of the year.
Methodology:
To compile our list of the best German stocks to buy, we first made a list of all German firms that are trading on the NASDAQ and NYSE exchanges. Then we selected 10 stocks that had the highest upside potential. The stocks are ranked in ascending order of the upside potential, as of November 15.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A technician recording data from a complex experiment involving pharmaceutical products.
Evotec SE (NASDAQ:EVO)
Upside potential as of November 15: 8.46%
Evotec SE (NASDAQ:EVO) is a drug discovery partnership company that offers solutions to foundations, academic institutions, pharmaceutical and biotechnology companies, and charity groups. The organization provides services in several therapeutic areas, such as infectious diseases, diabetes, inflammation, oncology, women’s health, and disorders of the central nervous system. The shared R&D division, which accounts for around 80% of sales, offers integrated drug discovery collaborations based on its own, internally generated assets as well as drug discovery and manufacturing services on a standard fee-for-service basis. CDMO services for biologics are provided by the Just-Evotec Biologics segment, which accounts for 20% of sales. The company employs more than 5,000 people and operates 18 production facilities, primarily in the US and Europe, as of 2023.
The Just-Evotec Biologics division had a remarkable revenue increase of 74% in the first nine months of 2024 when compared to the same time the previous year. However, this was offset by a 12% drop in revenue from the shared R&D segment, which remains under pressure in a competitive market environment.
After a recent investment phase that has reduced profits, Evotec SE (NASDAQ:EVO) seems to be in a good position to grow and maintain its company as its strategic expansion plans materialize. US-based Halozyme Therapeutics submitted a nonbinding acquisition offer to Evotec on November 15, 2024, offering EUR 11 per share ($11.64), or around EUR 2 billion ($2.1 billion) in fully diluted equity value. The proposed offer provides a more than 27% premium over Evotec’s most recent closing price before the announcement. Evotec’s stock on the German stock exchange jumped more than 20% after the announcement.
Evotec SE (NASDAQ:EVO) is in a strong position to take advantage of the growing need for biologics from biopharma companies because of its focus on expanding its biologics manufacturing capacity. EVO is one of the best German stocks on our list.
Overall EVO ranks 10th on our list of the best German stocks to buy. While we acknowledge the potential of EVO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
