Wednesday, August 28, 2019

Boskalis intrinsic value at the price where the CEO has bought shares.

The CEO of Boskalis yesterday bought EUR 875 000,- worth of shares around the current price of EUR 17,50. That is slightly lower than the current book value of EUR 18,50 per share and slightly higher than than the current Graham Value which is lower than book due to low Earnings per Share at the moment.

 Graham Defensive Analysis based on Chapter 14 of The Intelligent Investor:

SECTOR: [PASS]  Boskalis 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. Boskalis' sales of €2 569 million, based on 2018 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. Boskalis's current ratio €1 812m/€1 948m of 0.9 fails this 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 Boskalis is €356 million, while the net current assets are - €444 million. Boskalis 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. Boskalis posted a loss in 2016 and 2018 and thus fails this test. 

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. Boskalis's E/P of 4% (using average earning over 3 years) 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. Boskalis has a Graham number of (15 x €0,65 EPS x 1,5 x €18,5 Book Value) = €16 

Dividend: ?

Conclusion:  Now might be a good time to buy. HAL Trust, for example, has recently expanded its ownership to more than 40% of Boskalis. Not for the Graham Defensive Investor and not what Warren Buffett would call a "wonderful" company.

Let us invest for you (min. EUR 100 000,-)

No comments: