Conclusion October 2020: At EUR 7,80 it seems even cheaper today.
SALES: PASS The investor must select companies of "adequate size". This includes companies with annual sales greater than 260 million Euros. ABN AMRO's Operating Income of 7 841 million, based on 2022 figures, passes this test. Sales have decreased.
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. ABN AMRO is a financial stock so the current ratio analysis cannot be applied and this criterion cannot be evaluated.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: FAIL Long term debt must not exceed net current assets. Companies that meet this criterion display one of the attributes of a financially secure organization. ABN AMRO is a financial stock so this variable is not applicable and this criterion cannot be evaluated.
LONG-TERM EPS GROWTH: PASS 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 ABN AMRO have been increasing. In the past, ABN Amro (and many other banks) failed. In 2020 ABN Amro has booked a loss.
Earnings Yield: PASS The Earnings/Price (E/P) ratio, based on the lesser of the current E/P or the E/P using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,6%. Stocks with high Earnings Yields are more defensive by nature. ABN AMRO's Earnings Yield of 12% (based on last years earnings) passes this test.
GRAHAM NUMBER: PASS The geometric average of 1,5 x book value and 15 x EPS is the Square Root of 1,5 x 25 Euros x 15 x 1,4 Euros = 27 Euros.
DIVIDEND: ABN AMRO pays a dividend of 50% of earnings, was 0,99/16,4 = 6%.
EUR 500m buyback. EUR 0.5b buyback / EUR 7.4b = 7% in total 13% return of capital including dividend.
CONCLUSION 2023: ABN Amro seems to be profiting from increasing interest rates. The stock is not expensive at EUR 16,44. The buyback will increase book value and earnings per share.
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