Monday, November 20, 2023

Jacobs Douwe Egberts PEETS aka JDE Peets share Price and Graham Defensive Value


Jacobs Douwe Egberts PEETS Benjamin Graham Defensive Analysis based on 2022 results:


SECTOR: [PASS] Jacobs Douwe Egberts PEETS 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.  Jacobs Douwe Egberts PEETS's sales have increased to €8 150 million, and based on 2022 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.  Jacobs Douwe Egberts PEETS's current ratio €3 222m/€5 049m of 0.6 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  Jacobs Douwe Egberts PEETS is €6 445 million, while the net current assets are €-1 827 million.  Jacobs Douwe Egberts PEETS fails this test.

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. Companies with this type of growth tend to be financially secure and have proven themselves over time.  Jacobs Douwe Egberts PEETS's has not been listed long enough for a conclusion on this.

Earnings Yield: [PASS] [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.  Jacobs Douwe Egberts PEETS's E/P of 6,3% (using last year's earnings) just fails 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.  Jacobs Douwe Egberts PEETS has a Graham number of (15 x €1,5 EPS x 1,5 x €21 Book Value) = €27 and passes this test.

Dividend: 0,70 EUR / 25 EUR = 3% 

Conclusion November 2023:  Jacobs Douwe Egberts PEETS seems fairly priced. The debt may be acceptable for a company selling nondiscretionary products like coffee and tea.

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