Monday, June 20, 2016

Binck value trap? Graham Defensive Screen Intrinsic Value calculation Binckbank AEX BINCK, NL0000335578

SECTOR: [FAIL] Binck  is in the Financial sector, which is one sector that this methodology avoids. Technology and financial stocks are considered too risky to invest in. 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: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Binck's sales of €170 million, based on 2015 sales, 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. Binck's Earnings per share have declined over that period and fails the EPS growth test.

Earnings Yield: [PASS] 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. Binck's E/P of 8% (using last year's Earnings) fails this test.

Graham Number value: [PASS]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Binck has a Graham number of (€0,3 EPS x 5,9 Book Value) = €6,5

Dividend? 50% of Net Income: 0,20/5 = 4%

Binck seems cheap if you consider only (last year's) Earnings per Share and Book Value, but Graham would not consider it a share for the defensive investor because of the decreasing Earnings per Share (maybe due to new Belgian tax law on share-trading and competitor DeGiro ?).

It might be a buy around 2,5 Euros as it is buying backing shares. The lower the price the better.

See: for more in depth, qualitative analysis of "good" companies.

Old Binck analysis based on 2012 numbers:

Comments, questions or E-mails welcome:

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