Comments on: Negative Enterprise Value Stocks for 2010

By: Jae Jun

Jae Jun — Mon, 09 Aug 2010 16:15:52 +0000

Enterprise Value is only a theoretical term of how much value there is in the enterprise.
If a real business had a horde of cash, that amount would be included in the buying price, but with enterprise value, it is subtracted since it isn’t adding to the “enterprise value”.

If you go through the formula, you will see why a firm that has lots of excess cash will have a lower enterprise value.

By: Charles

Charles — Sat, 07 Aug 2010 14:46:34 +0000

Enterprise Value is the firm value purchaser will buy. If a firm have a negative enterprise value, does it mean that purchaser can buy it free plus getting additional cash without having to pay anything?

Why a firm have more cash, the enterprise value is lesser. Why company got to sell for less when they are cash rich?

Thank you.

By: Jae Jun

Jae Jun — Fri, 09 Jul 2010 06:46:50 +0000

@ Dom,
Yes that is the formula for excess cash that I used in following posts.

By: Dom

Dom — Thu, 08 Jul 2010 18:59:08 +0000

In your excess cash formula you assume that the company has some amount of excess cash. Wouldn’t a better formula be:

Excess Cash = MAX(0,Total Cash – MAX(0,Current Liabilities-Current Assets))

As I’ve written it the formula will result to “0″ for companies that have no excess cash whereas your formula will generate a negative number (the excess cash shortage). Or should we include the cash shortage?

For example I was reading Joe Ponzio’s article on JTX. If I run your excess cash formula for the year ended 4/2009, I get negative $41 million. With my formula, it calculates to zero. Which is right?

By: zehua

zehua — Sat, 10 Apr 2010 02:47:31 +0000

Hi Jae,
I see many of your stocks in the neg. enterprise value are actually foreign stocks. I doubt if the currency conversion is correct, because stocks like IMOS seem to have far more debt than cash.

Thanks,
Zehua

By: Jae Jun

Jae Jun — Tue, 16 Feb 2010 04:29:18 +0000

1. Total cash is cash and equivalents.
2. Yes you are correct.

By: Carl

Carl — Mon, 15 Feb 2010 19:06:20 +0000

I have a question about the formula on Excess cash. Does total cash means Cash flow from operation ? 2nd, if current assets is greater than current liabilities then Excess cash = Total cash – 0 ?

By: Jae Jun

Jae Jun — Mon, 04 Jan 2010 16:32:10 +0000

I didn’t use the yahoo screener this time.
Used the NYT screener. Found that it had more stocks in the database as it included OTC stocks as well.

By: SMD

SMD — Mon, 04 Jan 2010 16:24:00 +0000

Hi Jae

Ran the Yahoo screener using the criteria set out in your March email but results are different than those posted above (both in population and enterprise value). Grateful if you could explain the discrepancy.

By: Jae Jun

Jae Jun — Mon, 04 Jan 2010 04:55:44 +0000

Thanks Doug.

Moneymaker,
CMM has 2 years of historical data so calculations won’t be correct.

By: moneymaker

moneymaker — Sun, 03 Jan 2010 05:27:45 +0000

it appears that your spreadsheets does not pick up CMM’s data correctly?

By: Doug

Doug — Sat, 02 Jan 2010 14:35:05 +0000

Good work on this. Happy New Year’s – I hope it’s a prosperous one!
.-= Doug´s last blog ..Best and Worst Banks According to Forbes =-.