Monday, October 25, 2021

Aperam Graham Defensive Analysis

Conclusion 2019: Profit has gone down. Too difficult pile. Since then the share price has almost doubled...

In 2010 ArcelorMittal approved a proposal to spin-off ArcelorMittal’s stainless and speciality steels businesses to its shareholders in order to enable it to benefit from better visibility in the markets. The Mittal family owns around 40% of the shares.

SECTOR: [PASS] Aperam 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. Aperam's sales of €3 624 million, based on 2019 sales, pass this test.

CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Aperam's current ratio €1 418m/€423m of 3.4 passes 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 do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for Aperam is €379 million, while the net current assets are €995 million. Aperam 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. EPS for Aperam were often negative in the recent past and therefore the company fails this criterion.

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. APERAM's  E/P of  8% (using an average of the past 3 year's earnings) 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. Aperam has a Graham number of (15 x €4 EPS x €30 Book Value) = €52

Dividend: €1,75/€49 = 3,5%

Conclusion  2020: Over the years it seems to be creating value. Fairly priced. 

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