Thursday, April 14, 2016

Accell Group currently selling at roughly Graham value. Price = Intrinsic Value

NOTE:  Accell's short term results over the past few years have been negatively influenced by the take-over of Raleigh bikes. That resulted in the dip in Graham value. Updated with 2015 figures.

Graham Defensive analysis based on The Intelligent Investor book Chapter 14:

SECTOR: [PASS] Accell 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. Acell's sales of €986 million, based on 2015 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. Accell's current ratio €525m/€334m of 1.6 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for Accell is €59 million, while the net current assets are €191 million. Accell passes 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. Accell's EPS growth over that period of 30% passes the EPS growth test.

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. Accell's E/P of 7% (using the current 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. Accell has a Graham number of (22,5 x €1,0 EPS x €12,11 Book Value) = €18,2. Today's price is: €18,75

Dividend: Accell pays a dividend of roughly €0,75, which is 4%

Conclusion April 2015: Accell is neither cheap nor expensive. Buy at under €17,4 sell over €21.

Previously in June 2013 I wrote : Accell. Buy €1 of (Graham) value for around 64 cents. This was the graph.

This was the conclusion:
Margin of Safety: A €18,5 Graham value for sale at a €11,9 Mr. Market price. You can buy €1 euro of value for 64 cents. 

If you had bought at €11,9 and sold for €20 in June 2015 you would have had a 68% return plus dividend in 2 years.

Comments, questions or E-mails welcome:

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