Aalberts, Benjamin Graham Defensive Analysis and Mr. Market

Graham asks the reader to imagine that they are one of the two owners of a business, along with a partner called Mr. Market. The partner frequently offers to sell their share of the business or to buy the reader's share. This partner is what today would be called manic-depressive, with their estimate of the business's value going from very pessimistic to wildly optimistic. The reader is always free to decline the partner's offer, since they will soon come back with an entirely different offer

Aalberts Graham Defensive Analysis:

SECTOR: [PASS] Aalberts 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. Aalberts' sales of €3 324 million, based on 2023 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. Aalberts' current ratio €1 431m/€895m of 1,6 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 meet this criterion display one of the attributes of a financially secure organization. The long-term debt for Aalberts is €600m while the net current assets are €536m million. Aalberts 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. Aalberts' EPS growth over that period of 270% passes the EPS growth 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. Aalberts's E/P of 7% (using the average of last 3 years) passes this test.

GRAHAM NUMBER VALUE:  [FAIL]  [PASS]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Aalberts has a Graham number of √(15 x €3,2 EPS x 1,5 x €23 Book Value) = €42

Dividend: EUR 1,13/42 = 2.6%

Conclusion January 2023 at 42 Euros: A bit too much debt, price (koers) a bit too high at the moment compared to Graham Value but considering track record a buy at EUR 42.

Conclusion February 2024 at 42 Euros: A bit too much debt, price (koers) equals Graham Value but considering track record a buy at EUR 42.

Note: There was an opportunity to buy at EUR 29,1 in the past year.