Wednesday, October 31, 2018

Oranjewoud intrinsic value and stock price

SECTOR: [PASS]  Oranjewoud 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. Oranjewoud's sales of €2 386 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. Oranjewoud's current ratio €1 107m/€869m of 1.3 fails the 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 Oranjewoud is €312 million, while the net
current assets are €238 millionOranjewoud 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. Oranjewoud made a loss in 2013 and 2014.

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. Oranjewoud's E/P of 5% (using average of last 2 years 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. Oranjewoud has a Graham number of (15 x €0,4 ? EPS x 1,5 x €4,8 Book Value) = €6,5 and fails this test.


Conclusion: Oranjewoud is Antea Enginering and Strukton (Rail) construction. Doesn't seem to be a wonderful company that is throwing off cash. Earnings of EUR 12m ? / EUR 305m equity is return on equity of 4%. Value hasn't increased since 2012 and no dividends paid out.
Oranjewoud is not a stock for the Defensive Investor.

Do you speak Dutch? Check out Comments, questions or E-mails welcome:

No comments: