Monday, March 06, 2017

PostNL intrinsic value : Show me the money? Benjamin Graham valuation

I don't understand PostNL, they say they are profitable, but there is no book value. Long term debt has fallen, but short term debt is up. They haven't paid dividend for a long time and now paid out 12 cents. They plan to pay out 75% of profits, but...   There was a little spike in the price because the Belgian Post wants to buy PostNL.

SECTOR: [PASS] PostNL 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. PostNL's sales of €3 423 million, based on 2016 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. PostNL's current ratio €1 173m/€1 257 of 0.9 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 PostNL is €227 million, while the net current assets are - €84 million. PostNL 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 PostNL were negative within the last 5 years and Earnings per Share have decreased over the last 10 years, therefore the company fails this criterion. 

P/E RATIO: [PASS] 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. PostNL's P/E of 6,7 (using the current PE) fails this test. >>What I don't understand is where the money is going.<<

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. PostNL has a book value of €0 and fails this test.

Dividend hasn't been paid for years. 2016 dividend: 0,12/4,19 = 3%

Diagram from 2013:

You could have bought at 2 Euros and sold at 4 and doubled your money. You can also double your money at roulette by betting on black. In fact you can win 90% of the time at roulette using the martingale system. It is true, but there is a catch ;)

Comments, questions or E-mails welcome:

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