Saturday, October 27, 2018

Novisource intrinsic value?

Conclusion 2017: "Price is 1,8 Euros. Too high for the Benjamin Graham Defensive Investor." today the price is under 1 Euro.

Novisource came to the stock market via a reverse take over in 2014 (lege beurshuls). The CEO and CFO of Novisource recently quit in 2018, the tax authorities are doing an investigation...

SECTOR: [PASS] Novisource is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES[FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Novisource's sales of €21 million, based on 2017 sales, fails this test, and sales are decreasing.

 [FAIL]  Novisource Current assets  €8,1m divided by short-term debt €5,3m = 1.5 which is under Graham's limit of 2. 

[PASS] Long-term debt €0,7m is lower than Net Current Assets €3m.

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. 
Novisource has lost money in 2 of 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. Novisource has a Graham number of (15 x €0,05 EPS x €0,4 Book Value) = €0,7

Dividend: € 0,0

Conclusion 2018: Eventhough the stock price has dropped from over 3 Euros to 98 cents, the stock still seems expensive. Not a stock for the Graham Defensive Investor.

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