Monday, May 22, 2017

Accell Group AEX ACCEL NL0009767532 intrinsic value after Pon bid

NOTE:  Accell's short term results over the past few years have been negatively influenced by the take-over of Raleigh bikes. That resulted in the dip in Graham value. Recently competitor Pon who own Gazelle bikes offered to buy the company for 33 Euros which resulted in a spike in the share price. Accell has said it is not open to the sale.

Conclusion 1 year ago April 2016:  "Today's price is: €18,75  Accell is neither cheap nor expensive. Buy at under €17,4 sell over €21." After that the price dipped to 17,40, selling at 21 would have resulted in an opportunity cost.

Graham Defensive analysis based on The Intelligent Investor book Chapter 14:

SECTOR: [PASS] Accell 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. Acell's sales of €1 050 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. Accell's current ratio €537m/€343m of 1.6 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] 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 Accell is €57 million, while the net current assets are €194 million. Accell passes this test.

LONG-TERM EPS GROWTH: [PASS] 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. Accell's EPS growth over that period of 30% passes 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. Accell's E/P of 4% (using the current Earnings) passes 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. Accell has a Graham number of (22,5 x €1,24 EPS x €12,38 Book Value) = €18,6. Today's price is: €18,75

Dividend: Accell pays a dividend of roughly €0,72, which is 2,4%

Conclusion May 2017: Accell's stock price has had a good run. There is a chance it might be bought for around 33 Euros, but I would sell above 30.

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