Wednesday, November 11, 2020

Accell share price and Benjamin Graham value

Sales are currently up due to Coronavirus crisis with people biking to avoid public transport and for local vacations? 

Graham Defensive analysis based on The Intelligent Investor book Chapter 14:

SECTOR: [PASS] Accell 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. Acell's sales of €1 111 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. Accell's current ratio €574m/€406m of 1.4 just fails 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 Accell is €129 million, while the net current assets are > €126 million. Accell just "passes" 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. Accell's Earnings per Share have not grown over the past ten years due to the expensive takeover of Raleigh North America.

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. Accell's E/P of 3% (using an estimate of next year's Earnings) 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. Accell has a Graham number of (15 x €0,8 EPS x €12 Book Value) = €15. Today's price is: €25

Dividend: Accell pays a dividend of roughly €0,50, which is 2%

Notes last year Friday, August 30, 2019

Accell Group started a North American adventure in 2012. It just sold its loss-making operations there for $1,- As you can see in the graph the step into North America has hurt the geometric average of book value and earnings per share over the past years, that is the Benjamin Graham Defensive Value:

Conclusion 2019: Earnings should be better in the future, now that the North America adventure is mostly over. 

Conclusion 2020: Too expensive, sales might be lower next year? 

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