Notes end of 2018: Novisource came to the stock market via a reverse take over in 2014 (lege beurshuls). The CEO and CFO of Novisource recently quit in 2018, the tax authorities are doing an investigation...
Conclusion 2018: Eventhough the stock price has dropped from over 3 Euros to 98 cents, the stock still seems expensive. Not a stock for the Graham Defensive Investor.
Today, June 18, 2020 the stock price is 10% lower at 90 cents per share.
SECTOR: [PASS] Novisource 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. Novisource's sales of €13,8 million, based on 2019 sales, fails this test, and sales are decreasing.
CURRENT RATIO: [FAIL] [PASS] Novisource Current assets €4,8m divided by short-term debt €2,6m = 1.8 which is just under Graham's limit of 2.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] Long-term debt €0,7m is lower than Net Current Assets €3m.
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. Novisource has lost money in 2016.
Earnings Yield: [PASS] Graham likes to see 7% or higher. If you use adjusted earnings without the 2019 impairment, the Earnings Yield is 7%.
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. Novisource has a Graham number of √(15 x €0,06 EPS x €0,4 Book Value) = €0,75
Dividend: € 0,05 (not being paid in 2020 due to Coronavirus).
Conclusion 2020: the price seems fair here, not a huge "margin of safety", buy at under 70 cents.