Thursday, July 09, 2020

Stern Groep N.V. share price and value guesstimate

Looks cheap, but too difficult pile? Stern has done a lot of deals, selling much of its businesses. With the profit the company paid out a EUR 3,50 dividend in 2019. Book value is EUR 27 and the market price is EUR 10...

The company and Chairman of the Board Henk van der Kwast are clear about the challenges facing the mobility sector and where they could have done better in the Annual Report: 

SECTOR: [PASS]  Stern Groep is in car sales and mobility. Technology and financial stocks were considered too risky to invest in when this methodology was published. 

[PASS]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million.Stern Groep's sales of €996 million, based on 2019 sales, pass 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. 
Stern Groep's current ratio €253m/€241m of 1 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 Stern Groep is €145 million, while the net current assets are €12 million. Stern Groep fails 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. 
Stern Groep's earnings have increased during the past years, but I don't have the figures from 10 years ago.

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. 
Stern Groep's E/P of 10% (using a guesstimate of EUR 1 Earnings per Share) 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. 
Stern Groep has a Graham number =  (15 x €1 EPS x 1,5 x €27 Book Value) = €27 

Dividend: ? 

PS: Today I Learned:

Stern has asked ABN Amro to be its "liquidity provider" instead of NIBC.   Which led me to the question: "What is a liquidity provider?"

The name itself seems to be a good description. More information in Dutch here

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