Tuesday, September 11, 2018

Stern Groep intrinsic value and intrinsieke waarde versus price

In Dutch when we say "intrinsieke waarde" we often mean "book value" or "net asset value". The book value per share ("intrinsieke waarde") of Stern is EUR 28,11 per share. The stock Price is currently 0,6x Book (P/B = 0,6). The roughly estimated business value per share is what Americans call "intrinsic value", that might be EUR 32 at Stern. It seems the stock is currently cheap along both metrics.

SECTOR: [PASS]  Stern Groep is in car sales and mobility. Technology and financial stocks were considered too risky to invest in when this methodology was published. 

[PASS]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million.Stern Groep's sales of €1 134 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. 
Stern Groep's current ratio €295m/€277m of 1,1 fails this test.

[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 Stern Groep is €242 million, while the net current assets are €18 million. Stern Groep 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. 
Stern Groep's earnings have increased during the past years, but I don't have the figures from 10 years ago.

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. 
Stern Groep's E/P of 10% (using the average of the 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. 
Stern Groep has a Graham number =  (15 x €1,6 EPS x 1,5 x €28,11 Book Value) = €32 

Dividend: €1/€16,25 = 6% 

Stern has a lot of short term debt, but looks like a buy under EUR 17,-.

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