Monday, June 08, 2020

Nedap stock price and Peter Lynch 15 x Earnings per Share line

15 x Earnings per Share vs Price

Conclusion October 2018: The Graham Number is relatively low, because of the low book value, based on earnings the value is higher. Price (koers) a bit too high at the moment. Start buying only if under 35 Euros.

June 2020: The price fell to EUR 31 in spring 2020 and went back up to EUR 42. On the other hand, a lot of stock prices fell around the end of March 2020 due to the Coronavirus panic.

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

SECTOR: [PASS] Nedap is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [FAIL]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Nedap's sales of €192 million, based on 2019 sales, fails 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. Nedap's current ratio €78m/€29m of 2.7 passes the test.
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 meet this criterion display one of the attributes of a financially secure organization. The long-term debt for Nedap is €18 million, while the net current assets are €49 million. Nedap passes this test.
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. Nedap's EPS growth over that period of 30% passes the EPS growth 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.ENedap's E/P of 6% (using the average of last 3 years and this year's estimate) 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. Nedap has a Graham number of √(15 x €2,2 EPS x 1,5 x €9 Book Value) = €22

Dividend: Nedap paid a farily high dividend of around 5 to 6%. Not sure about next dividend due to Coronavirus.

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