SECTOR: [PASS] Stern Groep is in car sales and mobility. Technology and financial stocks were considered too risky to invest in when this methodology was published.
SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million.Stern Groep's sales of €1 107 million, based on 2016 sales, passes 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. Stern Groep's current ratio €457m/€279m of 0,6 fails this 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 Stern Groep is €8 million, while the net current assets are -€178 million. Stern Groep fails 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. Stern Groep's earnings have increased during the past years, but I don't have the figures from 10 years ago.
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. Stern Groep's E/P of 9% (using the average of the last 3 years Earnings) passes 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. Stern Groep has a Graham number =
√(15 x €2,1 EPS x 1,5 x €28,42 Book Value) = €37
Dividend: €1/€23,82 = 4,2%
Stern has a lot of short term debt, but looks like a buy.
See www.beterinbeleggen.nl for investing ideas in quality companies.
Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com
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