Thursday, June 01, 2017

BinckBank intrinsic value Benjamin Graham valuation

A year ago I wrote Binck might be a value trap: http://sinaas.blogspot.nl/2016/06/binck-value-trap-graham-defensive.html since then the price has gone down and the value per share seems to have stabilized.


SECTOR: [FAIL] Binck  is in the Financial sector, which is one sector that this methodology avoids. Technology and financial stocks are considered too risky to invest in. Several of Graham's criteria, like the Current Ratio and Debt to Current Assets, do not apply to financial companies. As a result, the company will not be able to pass this methodology, although we will include the remainder of the analysis for informational purposes.

SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales 
greater than €260 million. Binck's sales of €148 million, based on 2015 sales, fails 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. Binck's Earnings per share have declined over that period and fails 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. Binck's E/P of 8% (using last year's Earnings) 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. Binck has a Graham number of (15 x €0,37 EPS x 5,8 Book Value) = €6,9

Dividend? 50% of Net Income: 0,20/4,4 = 5%

Binck might be a buy around 2,5 Euros as it is buying backing shares. The lower the price the better.

See: www.beterinbeleggen.nl for more in depth, qualitative analysis of "good" companies.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

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