Friday, June 19, 2020

NSI Nieuwe Steen 2019

Nieuwe Steen Investments real estate 2019 numbers. Graham evaluation based on Chapter 14 of The Intelligent Investor.

SECTOR: [PASS]  NSI  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. NSI's sales of €83 million, based on 2019 sales, fails this test.

CURRENT RATIO: [FAIL]  The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. NSI's current ratio €18m/€62m of 0.3 fails the 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 NSI is €325 million, while the net current assets are €-44 million. NSI 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. NSI made a loss in 2016 and therefore fails this 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. NSI's E/P of 6% (using the current adjusted Earnings of EUR 3) just fails 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. NSI has a Graham number of ( 15 x €3 EPS x €47 Book Value) = +/- €46

Note: With real estate I use 1 x Book Value instead of 1,5 x Book Value. 

Dividend €2,16/ €35 = 6%

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