Thursday, November 14, 2019

NN Group intrinsic value: Is my calculator broken?

It is not quite clear to me what the book value per share is for NN: Equity of €35 000m / 325m shares outstanding is €107 ?? Stock price EUR 36......

SECTOR: [FAIL] NN is an insurance company and therefore this methodology is not applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. NN's sales (premiums) of €12 064 million, based on 2017 sales, passes this test.

CURRENT RATIO:  not applicable. 


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. NN does not have a long enough track record as an independent company. The IPO was in 2014.

EARNINGS YIELD: [PASS] 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. NN's E/P of 15% (using the average of last 3 years earnings) passes 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. NN has a Graham number of (15 x €6,4 EPS x 1,0 x €90?* Book Value) = roughly €90 and passes this test. 

DIVIDEND €1,90/€36 = 5%

Conclusion 2019: Seems cheap. Outside my circle of compentence.

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