SECTOR: FAIL AEGON is in the Financial sector, which is one sector that this methodology avoids. Technology and financial stocks were considered too risky to invest in when this methodology was published even decades ago. Several of Graham's criteria, like the Current Ratio and Debt to Current Assets, do not apply to financial companies. As a result, the company will not be able to pass this methodology, although we will include the remainder of the analysis for informational purposes.
SALES: PASS The investor must select companies of "adequate size". This includes companies with annual sales greater than 260 million Euros. AEGON's sales of 10 708 million, based on trailing 12 month sales, pass this test.
CURRENT RATIO: FAIL The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. AEGON is a financial stock so the current ratio analysis cannot be applied and this criterion cannot be evaluated.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: FAIL Long term debt must not exceed net current assets. Companies that meet this criterion display one of the attributes of a financially secure organization. AEGON is a financial stock so this variable is not applicable and this criterion cannot be evaluated.
LONG-TERM EPS GROWTH: FAIL Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for AEGON were negative in 2008 and have declined 86% since 2006.
P/E RATIO: FAIL The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. AEGON's P/E of 22 fails this test.
PRICE/BOOK RATIO: PASS
The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. AEGONS's Price/Book ratio is 0,4, while the P/E is 22. AEGON passes the Price/Book test.
DIVIDEND: AEGON pays a dividend of 0,25/5,14 = 4,9%.
Conclusion Aegon seems cheap compared to book value. IF you had bought in 2014 (see chart below) and IF you sold at 7,60 in 2015 you would have made a 50% profit. (And IF my brother had tits he would be my sister.)
Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com
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