Friday, May 20, 2016

Batenburg Techniek intrinsic value calculation Graham Defensive analysis

SECTOR: [PASS]  BATENBURG TECHNIEK is an installation company not a high tech nor financial Company, and therefore this methodology is applicable. 

SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. BATENBURG's sales of only €136 million, based on 2015 sales, fails this test.

CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. BATENBURG's current ratio €66m/€28m of 2.4 passes 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 do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for BATENBURG is €0,3 million, while the net current assets are €38 million. BATENBURG passes this test.

LONG-TERM EPS GROWTH:[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. BATENBURG made a loss in 2013 and fails 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. BATENBURG's E/P of 5% (using last years 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. BATENBURG has a Graham number of (15 x €0,7 EPS x 1,5 x €15.45 Book Value) = €16 

Dividend: €0,75/€19,6 = 4%

Conclusion: BATENBURG is small, well financed, but has had a bumpy ride. Not a stock for the Defensive Investor.

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