Negative EVA? <g> Well, I wouldn't use the absolute value. I'd put these in a class by themselves, and then try to understand why the market was so unwilling to put a premium on the companies earnings abilities. On the face of it, a negative ratio would suggest true value.
[EDIT- negative EVA implies trading below net cash, so NPK wouldn't be negative as the price per share exceeds cash on hand. One place I've seen this is places like biotech, where earnings are negative and burn rate is important. Negative earnings over a negative EVA- do the negatives cancel out? <g> Other example might be DVIN, an out of favor internet capitalization firm (don't know quite how to describe it, pointed out by M Burke as trading below cash with no debt]
NPK might be negative. I was thinking about this particular one again. I asked myself, if I could choose between a CD yielding 6% and NPK yielding 6%, which would I choose? The large ratio of cash to share value makes it look more like a CD than most stocks. But I think I'd choose the CD, as it seems safer (better 'risk adjusted' return?) NPK could burn their cash fighting a decline in margins as their sales drop. Since you've seen indication of this with the TGT announcement, and I read also Walmart is doing the same thing, it's quite likely the company will be hurt quite badly by oversees competition. So a negative ratio for NPK might not be enough to compell a buy of the stock after looking at the macros.
I noticied Merrill Lynch reports EVA/EBITDA on stocks they follow, but doesn't offer a way to screen on the numbers. The EVA/EBITDA for N (Inco, up nicely today for some reason) was between 3-4. Seems kind of low. Would like to compare it to EVA/Earnings, but I haven't done the calculations yet. |
