← Autodidact Archive · Original Dissent · JoseyWales
Thread ID: 18713 | Posts: 6 | Started: 2005-06-18
2005-06-18 13:51 | User Profile
how does a person tell if a stock is trading at "cash value", cash on hand divided by shares outstanding ?
what other key items should one look for ?
2005-06-18 20:02 | User Profile
That sounds right (Cash and Cash Equivalents/Number of Shares Outstanding).
When I took accounting classes, I don't think I came across that as a significant ratio though because I guess the assets must be looked at in the context of liabilities which is why book value would be a more meaningful measure. Also, if management is efficient utilizing resources, it would keep unproductive cash to a mininum through short-term investments.
I would think that Earnings Per Share and Book Value (Assets minus Liabilities/Number of Shares Outstanding) would be better ratios to use when comparing companies.
2005-06-18 20:11 | User Profile
There are plenty of companies with billions of cash on hand. I don't think the bit about short-term investment is valid (yeah, they get some nominal interest in a bank, but investing in other companies is probably looked down upon as too volatile). Diversification and other markets penetration is, what I see, a prefered option, but Microsoft, for example, is losing money while trying that.
2005-06-26 03:39 | User Profile
Hey Josey Wales.. saw your link and wanted to help you out. The key approach on SEC filings is weeding through the accountant-ese because it's another language. Mad Russian had a very apt point about investments in other companies, or investment vehicles which are not truly cash on hand. Important. The " burn rate ", especially in biotechnology and other R+D related high tech is important. In other words, how many more quarters can the company afford to lose money in, before it turns a profit, because after that point they will need to either borrow money flat out, or more likely, start selling a fraction of the company to lenders. For me, unless the company is on the verge of something BIG that ONLY they or VERY FEW are in, then I disregard those who cannot portray ( not in the press, but in demonstrated capability ) the ability to break the profitability line. The most important factor in my evaluations is turning profit on a GAAP basis ( Generally Accepted Accounting Principles ). Granted, many companies are not near that, and can still be explosive. But because the attitude of the market is overall bearish now, and has been for 5 years, I do not feel compfortable doing otherwise. Most of the companies I floow seriously have been in business for a minimum of 5 years. That means the efforts of their R=D, then their applied sales happen comesurately with continued R+D, then a successful company reaches a point, needed to be a success, where true profitability happens, and even after that happens, you still want a positive balance sheet. For example, GULF.. one of my new picks. Now, GULF has 28 million shares. Trading at 1 dollar and profitable. They have less than a million in any kind of debt, and over 60 million in assets,if you take a look at depreciation levels also, accountants play games with that. The leeway is significant. There are set percentages for each sector as far as what depreciation is. With the oil companies, I am looking forward to next quarter. That is when the 58-60 levels will show on the book. But for example, if you look at CPST, having 83 million in cash ( I remember it when it had 150 million in cash not equivalents ) is now on the verge of profitability. For the long haul, you can't beat CPST. But, I like to make money tomorrow just like everyone. This is why evaluating which ones ( once you whittle them down to being very solid and approved ) is different for different people at any given moment.
2005-07-02 06:39 | User Profile
Discussions like this presume that money is made in stocks by "fundamental" factors. The most money that is made in stock trading, is by recognizing trends and anticipating emotional actions/reactions. Trends and emotions are not particularly rational.
2005-07-28 21:47 | User Profile
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