Thursday, February 06, 2020

FNG NV stock worth a second look.

SECTOR: [PASS]  FNG 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. FNG's sales of €511 million, based on 2018 sales, pass this test. Sales including Ellos Holding should be around EUR 780m in future. 

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. FNG's current ratio €339m/€170m of 2.0 passes 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 FNG is €447 million, while the net current assets are €169 million. FNG 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. FNG's history as a public company is too short.  FNG fails this test.

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. FNG's E/P of 7% (using the average of last 2 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. FNG has a Graham number of (15 x €0,9 EPS x 1,5 x €30 Book Value) = €25 and passes this test.

Conclusion December 2018: FNG stock seems inexpensive.

Conclusion January 2020: FNG stocks seems cheaper.

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