Monday, September 10, 2018

Boskalis intrinsic value Benjamin Graham analysis

It is still a surprise to me, how well the price of many stocks moves around a simply calculated Graham Number value. What makes things difficult for a company like Boskalis is that is isn't easy to predict how the business will do during the next 5 to 10 years... In investing you don't have to predict everything, you can also decide to place a company in what Charlie Munger calls the "too difficult pile".

SECTOR: [PASS]  Boskalis 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. Boskalis' sales of €2 370 million, based on 2017 sales, passes 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. Boskalis's current ratio €1 446m/€1 690m of 0.9 fails this 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 Boskalis is €356 million, while the net current assets are - €244 million. Boskalis 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. Boskalis posted a loss in 2016 and fails this 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. Boskalis's E/P of 4% (using last year's  Earnings) fails 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. Boskalis has a Graham number of (15 x €0,84 EPS x 1,5 x €19,4 Book Value) = €19 

Dividend: €1/€24 = 4% 

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