Wednesday, October 24, 2018

KPN price still higher than decreasing intrinsic value

Elon Musk wrote to his SpaceX employees Acronyms Seriously Suck, KPN didn't get the memo?

SECTOR: [PASS]  KPN 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. KPN's sales of €6 500 million, based on 2017 sales, pass this test, but sales are decreasing year to year.

 [FAIL]  Current assets  €3 081 divided by short-term debt €1 882 = 1.6 which is under Graham's limit of 2. 

[FAIL] Long term debt €8 290 is higher than Net Current Assets €1 200.

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. EPS for KPN have decreased since 2003 and therefore the company fails this criterion. It has also lost money during the past 5 years.

Earnings Yield: [FAIL] Graham likes to see 7% or higher. 6% 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. KPN has a Graham number of (15 x €0,16 EPS x €0,67 Book Value) = €1,6

Dividend: € 0,11/€2,4 = 4,5%

Conclusion 2016: KPN is not a growing, money-making machine. The stock price and debt are too high for the Defensive Investor.

Conclusion 2017 at EUR 3 per share: Copy / paste 2016

Conclusion 2018 at EUR 2,4 per share: Unchanged

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