Monday, April 18, 2016

Akzo Nobel Intrinsic Value AEX:AKZA NL0000009132 Benjamin Graham waarde

SECTOR: [PASS] AKZO is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. AKZO's sales of €14,859 million, based on 2015 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. AKZO's current ratio €5,679m/€4,597m of 1.2 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for AKZO is €2,161 million, while the net current assets are €1,082 million. AKZO fails this test.

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 AKZO were negative within the last 5 years (2012) and therefore the company fails this criterion. Earnings have also not grown in the past ten years (let alone corrected for inflation).

EARNINGS YIELD: [FAIL]  The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. AKZO's earnings yield of 4% (using the 3 year average Earnings) fails this test.

GRAHAM NUMBER VALUE: [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. AKZO has a Graham number of (22,5 x €3,2 EPS x €28,2 Book Value) = €45,2 and fails this test.

DIVIDEND 1,6 Euro/60,50 = 2,6%

Conclusion: Akzo seems to be turning around. Too expensive, a bit too much debt. Buy for 50 Euro or less.

Graph from 2014:

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