After a tough 2020 when oil price futures on a certain day and place were negative, Shell has done well. Error of ommission that I/we did not buy at EURO 10....
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Old Graham Analysis:
GRAHAM DEFENSIVE ANALYSIS:
SECTOR: [PASS] RDS.A is neither a technology nor financial Company, and therefore this methodology is applicable.
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. RDS.A has a Graham number of √(15 x €3,5 EPS x 1,5 x €24 Book Value) = €44 and passes this test.
Dividend: was 1/26 = 4%
SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. RDS.A's sales of $400 000 million, based on last year and current 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. RDS.A's current ratio $156,000m/$112,000m of 1.4 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 RDS.A is $127,000 million, while the net current assets are $44,000 million. RDS.A fails this test.
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. Companies with this type of growth tend to be financially secure and have proven themselves over time. RDS.A's lost money over 2020 and fails the test.
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. RDS.A's E/P of 9% (using the average of the last 2 years and this year's estimated earnings) passes this test.
Dividend: was 1/26 = 4%
Conclusion October 2nd 2020 at EUR 10: Seems like a buy today. Longterm solar plus batteries is getting cheaper than oil.
Conclusion October 2022 at EUR 26: Seems more fairly priced now.
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