Allen,
You might find this from Zacks interesting:
my.zacks.com
I honestly don't know how accurate their numbers are or if their calculations are realistic. As close as I can tell, it's a ballpark guess what assets are typically worth in a liquidation, and I'd be willing to bet it's a computer generated model which doesn't include any kind of "human" analysis. I'm sure there are as many concepts of what constitutes value as there are value investors. Book value is one of the places I screen for value on the theory that if the stock represents real assets, it should be worth more. The flip side is if the assets are maxed out on leverage, book value becomes meaningless because the creditors own the assets, not the shareholders.
It seems to me that an established, profitable company should show a pattern of decreasing debt. Instead what I see on a large percentage of these companies is a steady pattern of increasing debt every single quarter. If these companies are so profitable, why can't they pay their bills without borrowing more money? When a company is reporting losses, the consensus seems to be to look at cash burn as a way to establish value, but when a company is reporting profits, somehow the whole concept of cash burn goes right out the window. Maybe I'm suffering from tunnel vision, but I want to see something tangible behind my share of stock and not just bookkeeping entries. Jumping in the back of a long line of creditors and watching the line get longer in front of me every quarter isn't my idea of value. |
