Tuesday, October 03, 2017

Nedap stock intrinsic value using Benjamin Graham Defensive analysis

Old chart February 2017:

Profits were up in 2016 but lower than 2014, 2015 was quite a dip. The dividend is quite high: €1,3/37 = 3,5%

Not a stock for the Graham Defensive Investor at the current price.
Today October 2017
The discrepancy between Price and estimated Graham Value is interesting. I don't have a theory why this might be the case for Nedap, except dividend % return?

SECTOR: [PASS] Nedap is neither a technology nor financial Company, and therefore this methodology is applicable. 
SALES: [FAIL]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Nedap's sales of €186 million, based on 2016 sales, fails 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. Nedap's current ratio €69m/€39m of 1.8 just 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 Nedap is €16 million, while the net current assets are €30 million. Nedap 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. Nedap's EPS growth over that period of 60% 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. ENedap's E/P of 4% (using the average of last 3 years) 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. Nedap has a Graham number of √(15 x €1,4 EPS x 1,5 x €8,34 Book Value) = €16

Dividend: Nedap currently pays a dividend of 1,40 E/40 E = 3,5%

Conclusion: Price (koers) a bit too high at the moment. Start buying only if under 30 Euros.

See www.beterinbeleggen.nl for analysis of other great companies.

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