Wednesday, December 11, 2019

Koninklijke Brill intrinsic value and stock price

Brill's value has dipped in 2018 for a simple reason. The company loaned money which it in turn paid out to shareholders as a one-time dividend of 4 Euros. So the company itself is now worth 4 Euros less per share.

Founded in 1683, Brill is a publishing house with a rich history and a strong international focus. The company’s head office is in Leiden, (The Netherlands) with a branch office in Boston, Massachusetts (USA). Brill was listed at the Amsterdam Stock exchange in 1896.

SECTOR: [PASS]  Brill is in publishing and passes this test. Technology and financial stocks were considered too risky to invest in when this methodology was published. 
SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Brill's sales of €36 million, based on 2018 sales, fails this test.

[FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Brill's current ratio €10m/€1316m is 0,6 and fails this test.

[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 Brill is €9,6 million, while the net current assets are minus €6 million. Brill fails this test.

[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. Brill's earnings have not increased from 10 years ago.

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. Brill's E/P of 4% (using last year's Earnings) 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. Brill has a Graham number of (15 x €0,9 EPS x 1,5 x €11 Book Value) = €14,4

Dividend: EUR 0,85/EUR 20,9 = 4%

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