Sunday, May 08, 2016
Advanced Metallurgical Group AMG intrinsic value Graham Defensive waardering AEX:AMG NL0000888691
SECTOR: [PASS] AMG 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. AMG's sales of €724 million, based on 2015 sales, pass this test.
CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. AMG's current ratio €342m/€176m of 1.94 almost passes 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 meet this criterion display one of the attributes of a financially secure organization. The long-term debt for AMG is €215 million, while the net current assets are €166 million. AMG 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. Companies with this type of growth tend to be financially secure and have proven themselves over time. AMG's EPS were negative in 2013, AMG fails this test.
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. AMG's P/E of 32 (using the current PE) fails this test.
PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. AMG has a book value of €3,56 and fails this test.
Dividend: €0,21/9,74 = 2%
Conclusion: AMG seems a bit expensive around €10 per share.