Thursday, June 14, 2018

Accell Group NL0009767532 price has dipped back towards intrinsic value

Conclusion May 2017: Accell's stock price has had a good run. There is a chance it might be bought for around 33 Euros, but I would sell above 30.

Last year it looked like a good idea to sell Accell if you didn't sell, you saw the share price dip by almost 50%. Profits were also down in 2017 due to problems and taxes in the US, so (Graham) Value has also gone down.

Graham Defensive analysis based on The Intelligent Investor book Chapter 14:

SECTOR: [PASS] Accell 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. Acell's sales of €1 068 million, based on 2017 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. Accell's current ratio €507m/€280m of 1.8 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 Accell is €126 million, while the net current assets are €227 million. Accell passes 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. Accell's Earnings per Share have not grown over the past ten years due to the expensive takeover of Raleigh North America.

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. Accell's E/P of 6% (using an estimate of next year's Earnings) 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. Accell has a Graham number of (22,5 x €0,94 EPS x €10,90 Book Value) = €15,3. Today's price is: €19,-

Dividend: Accell pays a dividend of roughly €0,50, which is 3%

Conclusion: "Too difficult pile", if the price drops below 15 Euros a buy. Shareholders will be unhappy that management did not accept Pon's offer of 33 Euros last year. Will another lower offer now be acceptable?

See: for analysis of quality companies.

Comments, questions or E-mails welcome:

No comments: