Thursday, June 01, 2017

Coca-Cola European Partners CCE intrinsic value using Benjamin Graham Defensive Analysis

SECTOR: [PASS]  Coca-Cola European Partners 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. Coca-Cola European Partners' sales of €9 133 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. Coca-Cola European Partners's current ratio €3 425m/€3 752m 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 Coca-Cola European Partners is €8 355 million, while the net current assets are - €327 million. Coca-Cola European Partners fails this test.

LONG-TERM EPS GROWTH: [FAIL] [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. Coca-Cola European Partners just went public last year after a merger.

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. Coca-Cola European Partners's E/P of 5% (using the last year's 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. Coca-Cola European Partners has a Graham number of (15 x €2 EPS x €13,50 Book Value) = €24,50 

Dividend: €0,84/€36,8 = 2,3%

Conclusion: Coca-Cola European Partners is not cheap around 37 Euros per share. Buy under 30 ?
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