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| FEBRUARY 2019 |
ASM International paid out a large 1-time dividend of EUR 4 per share, which led to a decrease in the remaining book value per share. Mr. Market gave Machine One beleggingsstudieclub an opportunity to profit from his mood swings, but we sold (much) too soon...
Benjamin Graham Defensive Analysis
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. ASM has a Graham number of √(15 x €7,5 EPS x 1,5 x €43 Book Value) = €85
Dividend: €2/€395 = 0,5% and has increased over the years.
SECTOR: [FAIL] ASM is in the Technology sector, which is one sector that this methodology avoids. Technology and financial stocks were considered too risky to invest in when this methodology was published. At that time they were not the driving force of the market as they are today. Although this methodology would avoid ASM, we will provide the rest of the analysis, as we feel times have changed.
SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. ASM's sales of €1 328 million, based on 2020 sales, pass this test.
CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. ASM's current ratio €1 158m/€397m of 2.9 passes this test with flying colors.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] 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 ASM is €50 million (zero loans), while the net current assets are €761 million. ASM passes this test easily.
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. ASM's earnings have increased by 350% over the past ten years.
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. ASM's E/P of 3% (using this years adjusted Earnings of €9) fails this test.
SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. ASM's sales of €1 328 million, based on 2020 sales, pass this test.
CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. ASM's current ratio €1 158m/€397m of 2.9 passes this test with flying colors.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] 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 ASM is €50 million (zero loans), while the net current assets are €761 million. ASM passes this test easily.
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. ASM's earnings have increased by 350% over the past ten years.
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. ASM's E/P of 3% (using this years adjusted Earnings of €9) 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. ASM has a Graham number of √(15 x €7,5 EPS x 1,5 x €43 Book Value) = €85
Dividend: €2/€395 = 0,5% and has increased over the years.
Conclusion: Oktober 2021 not for the Graham Defensive Investor.
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