Monday, August 28, 2017

Koninklijke KPN NV Price is what you pay, value is what you get.

SECTOR: [PASS]  KPN 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. KPN's sales of €6 806 million, based on 2016 sales, pass this test, but sales are decreasing year to year.

[PASS]  Current assets  €5 195 divided by short term debt €2 628 = 2.0 which is Graham's limit. 

[FAIL] Long term debt €8 156 is higher than Net Current Assets €2 567.

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 KPN have decreased since 2003 and therefore the company fails this criterion. It has also lost money during the past 5 years.

Earnings Yield: [FAIL] Graham likes to see 7% or higher. 6% 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. KPN has a Graham number of (15 x €0,18 EPS x €0,84 Book Value) = €1,8

Dividend€ 0,11/€3 = 4%

Conclusion 2016: KPN is not a growing, money making machine. The stock price and debt are too high for the Defensive Investor.

Conclusion 2017: Copy / paste 2016

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