The mere fact that a stock is trading below it's book value does not make it high risk. But, in today's inflated general market, a stock that trades below book usually does so for a good reason. You have to look at balance sheet, recent financial results, etc, and see why the stock is trading below book.
In the case of YESS, I would not take much comfort in the latest figure for it's book value, which is about $1.57 per share. (As of the latest quarterly report, which is as of 9/30/97) First, YESS has incurred a loss of .88 per share for the last 9 months of operations, and .31 in the last quarter alone. Obviously if such losses continue for much longer, there won't be much left of the book value. At this point we don't know what the last quarter's results were, and whether it was a loss (probable, in my opinion) or a small gain.
Second, note in the balance sheet as of 9/30/97 that Yess had inventory of over 24 million. There are about 14.59 million shares outstanding, so this is about $1.64/share in inventory alone. We know Yess has had some trouble selling it's products, so this inventory figure may overstate the true market value of their inventory.
If inventory is overvalued by 50%, say, then this would reduce book value by $.82 per share, bringing it down to $.75/share. This is entirely possible, in my opinion.
We know that, since the last quarterly report, that Yess has sold some of it's inventory to Wham-O for 10.4 million, plus the contingent right to receive about 8 million in royalty type payments over the next 7 years depending on how it sells. We don't know what the value of this inventory was, on the books of Yess. The sale of inventory was obviously done by Yess to raise cash, so they could continue on as a going business. They do have plans for new toys, and only time will tell whether or not the new management can turn this company around from the brink of disaster. The 1997 year end results should be out soon, and we should then know more.
RR |
