Why Lang & Schwarz’s Mispriced Fundamentals Offer a Rare Value Play

The stock market is a fickle beast, often pricing companies based on short-term noise rather than long-term fundamentals. Nowhere is this truer than with Lang & Schwarz AG (LUS1.F), where a staggering 99% EPS compound annual growth rate (CAGR) over the past five years has been met with a tepid 24% share price gain. This disconnect—driven by market pessimism and a temporary dip—is creating a once-in-a-decade opportunity to buy a high-growth financial services firm at a P/E of just 9.81, far below its historical average of 37.39.

The EPS Growth Story That’s Flying Under the Radar

Lang & Schwarz’s earnings surge is no fluke. Its core business—structuring financial derivatives and online trading platforms—has thrived in volatile markets, with a 5-year EPS CAGR of 99% (excluding non-recurring items). Even after adjusting for cyclical dips, the company’s 10-year average EPS growth remains robust at 4.9% annually, far outpacing peers in the capital markets sector.

Yet investors have been slow to recognize this. While the stock’s P/E ratio hit a decade-low of 6.89 in 2024, its earnings momentum remains intact. A visual>Lang & Schwarz’s EPS growth vs. share price performance over the past 5 years reveals a stark divergence: EPS has climbed 272% since 2020, while the stock price languishes 40% below its 2018 peak.

Why the Market Is Missing the Mark

The pessimism stems from two myths:
1. “Low Equity = Weak Balance Sheet”: Critics point to Lang & Schwarz’s €0 equity in 2025 as a red flag. Yet this reflects strategic choices, not insolvency. The firm has prioritized shareholder returns—272% total shareholder return (TSR) since 2020, fueled by a 20.73% dividend yield—over retaining earnings. With a Moody’s “Low” credit risk score, it’s clearly managing debt responsibly.
2. “Derivatives Are a Risky Bet”: While Lang & Schwarz’s derivatives business carries volatility, it’s also a tailwind in turbulent markets. The firm’s proprietary trading platforms (e.g., LS Trader) and OTC market-making capabilities give it an edge in high-fee, high-demand services.

TSR Boosted by Dividends and Value Investing Principles

Lang & Schwarz isn’t just an earnings machine—it’s a dividend powerhouse. Over the past decade, it has paid out €1.33 annually in dividends (TTM), with a payout ratio consistently below 60%. Even with projected cuts, the 5.8% trailing yield offers a cushion against market swings. Pair this with the 6.9% recent dip (driven by sector-wide fears of regulatory crackdowns), and you’ve got a stock trading at 86% below its 10-year average P/E.

Why Now Is the Time to Act

This is a classic “weighing machine vs. voting machine” opportunity. The market (voting machine) is pricing in worst-case scenarios, while the fundamentals (weighing machine) scream value. Here’s why the scales will tip:
- Valuation Arithmetic: At 9.81x P/E, the stock offers a 376% upside to its 10-year average. Even a reversion to the sector median P/E of 19.46 would double the stock price.
- Earnings Momentum: The 834% EPS surge in 2024—driven by strong derivative trading volumes—hints at a structural shift. As the firm expands its online platform to retail investors, earnings could keep accelerating.
- Dividend Discipline: While analysts warn of a potential dividend cut, the firm’s €234M market cap and €0 equity suggest it will prioritize liquidity. Even a reduced payout would still offer better returns than most fixed-income alternatives.

Final Call: Buy Before the Correction

Lang & Schwarz is a textbook value trap turned opportunity. The market’s focus on short-term risks has ignored the 99% EPS CAGR, 272% TSR, and 27% undervaluation vs. historical norms. With a 6.9% pullback creating a 52-week low, this is the moment to act decisively.

Risks? Yes—regulatory shifts or a collapse in trading volumes could hurt. But with a P/E of 9.81, the stock already prices in pessimism. The real risk is missing out on a potential 300% rebound as earnings and valuation converge.

The verdict? Buy Lang & Schwarz now. The “weighing machine” will correct this mispricing—don’t wait for the crowd to realize it.