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| PRACTICE |
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| THEORY |
SECTOR: [PASS] Ctac is a IT / ERP service company started in 1992.
SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Ctac's sales of €106 million, based on 2021 sales, fails this test.
Being a relatively small company, makes it vulnerable for losses, such as a court case against a single customer that they lost in 2019, cutting profit in half.
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. Ctac's current ratio €32m/€33m of 1 is too low.
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 Ctac is €13,4 million (of which a large part is lease obligations), while the net current assets are - €1 million. Ctac fails this test, on the other hand, debt is decreasing.
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. Ctac's earnings have increased 50% over the past five years.
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. Ctac's E/P of 7,8% (using last years earnings) passes 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. Ctac has a Graham number of √(15 x €0,25 EPS x 1,5 x €1,6? Book Value) = €3
Dividend: €0.11/€4,1 = 3%
Conclusion: over time the company has been creating value. Could be a buy under 4 Euros.
SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Ctac's sales of €106 million, based on 2021 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. Ctac's current ratio €32m/€33m of 1 is too low.
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 Ctac is €13,4 million (of which a large part is lease obligations), while the net current assets are - €1 million. Ctac fails this test, on the other hand, debt is decreasing.
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. Ctac's earnings have increased 50% over the past five years.
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. Ctac's E/P of 7,8% (using last years earnings) passes 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. Ctac has a Graham number of √(15 x €0,25 EPS x 1,5 x €1,6? Book Value) = €3
Dividend: €0.11/€4,1 = 3%
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