Marel: too diifficult pile

CHART: November 24th 2023 

Notes from last year when the share price was a bit above EUR 4

SECTOR: [PASS] Marel makes food processing systems and 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. Marel's sales of €1 361 million, based on 2021 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. Marel's current ratio €643m/€597m of 1.1 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 Marel is €385 million (but will increase with Wenger acquisition), while the net current assets are  €46 million. Marel fails this test.

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. Marel EPS grew by 400% over the past 10 years and passes this test.

Earnings Yield:  [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. Marel's E/P of  3% (using last year's Earnings) fails 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. Marel has a Graham number of √(15 x €0,14 EPS x 1,5 x €1,3 Book Value) = €2

Conclusion: Marel is growing and the intrinsic value is probably higher than the EURO 2 Graham Value. I don't know much about the company and industry. 

April 27 2022  Marel to acquire Wenger, a global leader in processing solutions for pet food, plant-based proteins, and aqua feed. EUR 500m