Royal Ahold Delhaize NV – Value Analysis (MILAN:AD) : January 3, 2017

Capitalcube gives Royal Ahold Delhaize NV a score of 91.

Our analysis is based on comparing Royal Ahold Delhaize NV with the following peers – Carrefour SA, Casino, Guichard-Perrachon SA, METRO AG, Jeronimo Martins, SGPS S.A. and Wm Morrison Supermarkets plc (CRR-IT, CO-FR, MEO-DE, JMT-PT and MRW-GB).

Investment Outlook

Royal Ahold Delhaize NV has a fundamental score of 91 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • Royal Ahold Delhaize N.V.’s current Price/Book of 1.67 is about median in its peer group.
  • The market expects AD-IT to grow faster than its peers and for the company to improve its current ROE.
  • AD-IT has relatively high profit margins while operating with median asset turns.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • AD-IT‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • Compared with the peers chosen, AD-IT has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • AD-IT has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

AD-IT has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 13.81% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 38.94%), and a well-cushioned interest coverage level of 6.32x, AD-IT can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 5 peers for the company have an outstanding debt balance.

AD-IT has moved to a Quick & Able from a relatively high liquidity profile at the recent year-end.

  • AD-IT‘s interest coverage is its highest relative to the last five years and compares to a low of 5.50x in 2011.
  • Though its interest coverage has remained relatively stable at 6.32x compared to 2015, its peer median has increased to 4.66x from 3.95x during this period.
  • Interest coverage fell 0.58 points relative to peers.
  • AD-IT‘s debt-EV is its lowest relative to the last five years and compares to a high of 27.36% in 2012.
  • The decrease in its debt-EV to 13.81% from 20.68% (in 2015) was also accompanied by a decrease in its peer median during this period to 38.94% from 40.41%.
  • Relative to peers, debt-EV fell 5.40 percentage points. Unlike the peer median, it is also below the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Carrefour SA 46.61 0.78 6.31 17.67
Casino, Guichard-Perrachon SA 61.98 0.97 0.69 6.4
METRO AG 43.03 0.85 1.67 26.79
Jeronimo Martins, SGPS S.A. 3.33 0.47 30.68 180.29
Wm Morrison Supermarkets plc 34.85 0.5 3 30.56
Royal Ahold Delhaize N.V. 13.81 0.99 6.32 57.02
Peer Median 38.94 0.81 4.66 28.67
Best In Class 3.33 0.99 30.68 180.29

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Company Profile

Royal Ahold Delhaize NV engages in the provision of food retail. It involves in the operation of supermarkets and e-commerce and distribution of perishable and non-perishable food and non-food consumer products. It operates through the following segments: Ahold USA, The Netherlands, and Czech Republic. The Ahold USA segment refers to Stop and Shop New England, Stop and Shop New York Metro, Giant Landover, Giant Carlisle and Peapod operations. The Netherlands segment refers to Albert Heijn covering the Netherlands, Belgium and Germany, Etos, Gall and Gall and bol.com business. The Czech Republic segment refers to Albert business. The company was founded in 1867 and is headquartered in Zaandam, Netherlands.

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