Friday, March 12, 2021

Fugro intrinsic value based on Graham Defensive number and 2021 EPS Guesstimate of EUR 1,-

Benjamin Graham Defensive screen analysis:
SECTOR: [PASS]  Fugro is neither a technology nor a 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. Fugro's sales of €1 069 million, based on 20202 sales, pass this test. Sales have recently been decreasing.

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. Fugro's current ratio €646m/€506m of 1.3 is OK, but 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 Fugro is €484 million, while the net current assets are €140 million. Fugro 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. Fugro's EPS have been negative over the past years, Fugro fails this test.

Earnings Yield: [FAIL][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. Fugro's E/P of 0,0% (using the average of last 3 years earnings) fails this test. With the guesstimate EPS of EUR 1,- per share the Earnings Yield is around 10%. 

Graham Number value: [FAIL] [PASS]  The Graham number value must be greater than the market price. Fugro has a Graham number of (15 x €0,50 EPS x 1,5 x €11,50 Book Value) = roughly €10 based on the Earnings Per Share 2021 guesstimate for 2021. 

Old Conclusion January 2020: "Fugro is still losing money, so it is not a Graham Defensive stock. The book value (which has decreased) is around EUR 7, you could recently buy the shares for less than EUR 6. Today at EUR 10,64 it is difficult to say whether the stock is cheap or expensive. That depends on future results. 

The offshore oil industry is picking up in 2020 and Fugro might be cash flow breakeven whilst making a loss, Fugro is not a stock for the Defensive Investor. It belongs on the "too difficult pile". 

Conclusion 2021: Still on the "too difficult pile". 

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