Friday, February 10, 2017

NN Group buy now? intrinsic value Benjamin Graham Defensive perspective

SECTOR: [FAIL] NN is an insurance company and therefore this methodology is not applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. NN's sales of €2 123 million, based on 2015 sales, passes this test.

CURRENT RATIO:  not applicable. 


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. NN does not have a long enough track record as an independent company. The IPO was in 2014.

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. NN's E/P of 10% (using the average of last 3 years earnings) passes this test.

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. NN has a Graham number of (15 x €3,9 EPS x 1,5 x €60 Book Value) = €73 and passes this test.

DIVIDEND €1,20/€31,7 = 4%

Conclusion: NN Group seems priced well below intrinsic value with a margin of safety at the moment. The "Korting" is over 50%.

See: for more in-depth, qualitative analysis of "good" companies.

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