Benjamin Graham Defensive Analysis
SECTOR: [PASS] Signify Lighting is neither a technology nor a 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. Signify Lighting's sales of €7 741 million, 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. Signify Lighting's current ratio €3 391m/€2 367 of 1.4 fails this 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 (and provisions) for Philips Lighting is €2 855 million, while the net current assets are €1 024 million. Signify Lighting fails this test.
LONG-TERM EPS GROWTH: [FAIL] [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. Signify Lighting as an independent company has an insufficient history for this criterion. Sales and profits have increased, a good sign.
Earnings Yield: PASS] The inverse of the Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be sufficiently high, which this methodology states is greater than 6,5%. Stocks with high Earning Yields are more defensive by nature. Signify Lighting's Earnings Yield of 8% (using this year's Earnings estimate) passes this test.
GRAHAM NUMBER: [PASS] The Graham number value must be greater than the market price. Signify Lighting has a Graham Number of Square Root ( 1,5 x €23 Book Value x 15 x €3,2 Earnings per Share) = € 41.
Dividend: EUR 1,5 / 29,6 = 5%
Conclusion October 2022 @ EUR 27,45 : Signify seems to be on sale today with a 27% discount to the Graham Value.
SECTOR: [PASS] Signify Lighting is neither a technology nor a 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. Signify Lighting's sales of €7 741 million, 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. Signify Lighting's current ratio €3 391m/€2 367 of 1.4 fails this 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 (and provisions) for Philips Lighting is €2 855 million, while the net current assets are €1 024 million. Signify Lighting fails this test.
LONG-TERM EPS GROWTH: [FAIL] [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. Signify Lighting as an independent company has an insufficient history for this criterion. Sales and profits have increased, a good sign.
Earnings Yield: PASS] The inverse of the Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be sufficiently high, which this methodology states is greater than 6,5%. Stocks with high Earning Yields are more defensive by nature. Signify Lighting's Earnings Yield of 8% (using this year's Earnings estimate) passes this test.
GRAHAM NUMBER: [PASS] The Graham number value must be greater than the market price. Signify Lighting has a Graham Number of Square Root ( 1,5 x €23 Book Value x 15 x €3,2 Earnings per Share) = € 41.
Dividend: EUR 1,5 / 29,6 = 5%
Conclusion October 2022 @ EUR 27,45 : Signify seems to be on sale today with a 27% discount to the Graham Value.
Conclusion January 2024: @ EUR 29,6 Slightly less attractive today. The recent dip to EUR 22,7 gave value investors a good price point at which to buy at a discount.
No comments:
Post a Comment