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Would Benjamin Graham Buy Olam International Ltd?

Olam International (SGX: O32) is a leading agri-business that operates from seed to shelf and supplies food and raw materials to customers across the world.

Founded in 1989, Olam is a relatively young company with its roots in Nigeria. Originally a single country, single product company, Olam has since blossomed into a business that operates across 65 countries and 16 product platforms.

For investors who are conscious about sustainability, Olam may be of interest. It prides itself on responsible growth, ensuring that long term value can be delivered to all its stakeholders through doing business in a sustainable manner. Adding further to its image, Olam recently donated $250,000 to help fight Ebola.

Investors however need more than just an agreeable company with a nice story to tempt them. In common with many companies, Olam has taken a tumble recently and this could open up value investing opportunities.

A relatively small company with ambitious growth plans, Olam has seen its profits rise over the last few years – nearly doubling in the last two. Solid earnings and a deflated price has meant a generous earnings yield of close to 12% is available. However, being a small company looking to grow, little of these earnings are available to investors through dividends. The dividend yield currently stands at only 2.4%.

Debt may also be a turn-off for value investors, with the total debt edging close to twice the value of the company. Large debt liabilities are similarly reflected in a current ratio of only 1.4.

Olam may not seem to be overpriced with an earnings multiple of just 8.6, which is some way below the market average of 14. However that alone does not mean it is a value share. Rather, being a company heading towards only its 25th birthday with further plans for growth, Olam could be one for investors of a different discipline.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.