Tuesday, October 04, 2016

Heijmans not a "Money Making Machine".... intrinsic value valuation

In 2013 I put this graph on this blog. You could buy Heijmans for 6 Euros a share ...
and sell for more than 13 Euros a year later in 2014.

a good trading profit, but the Intrinsic Value of Heijmans hasn't been increasing. The company made a loss in 4 of the last 5 years and book value per share has decreased from 18,66 to 12,87 Euros.
Here is the updated Benjamin Graham Defensive Stock Screen analysis:

SECTOR: [PASS]  HEIJMANS 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. HEIJMANS's sales of €1 982 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. HEIJMANS's current ratio €810m/€770m of 1.1 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 HEIJMANS is €132 million, while the net
current assets are €40 millionHEIJMANS 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. HEIJMANS's earnings have declined and were negative in 2014 and 2015 thus fails the EPS growth test.

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. HEIJMANS's E/P of -4% (using the last 3 years 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. HEIJMANS has a Graham number of (22,5 x €0,00 EPS x €12,87 Book Value) = €0,0

NO Dividend and Heijmans has been selling millions of extra shares over the past years to fund its losses.

Conclusion: Heijmans is not a stock for the defensive investor because the company isn't consistently profitable and has too much debt. On the other hand the price is low compared to book value and profits in the past (and possible profits in the future?).

For better companies visit: www.beterinbeleggen.nl 

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

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