Forum Archive Index - March 2000

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

OK Derek, I'll play ;-)
> 
> If you have 2 companies in same business field with fundamentals as
> below:
> 
> Company A:
> 
>              Total Issue :   90,418,791
>              Full Year Profit :    -13,497,702.14 (NZD)
>              Earnings/Share:    -98.7250 cents
>
Something is strange here.   I calculate the earnings per share  
based on (Full Year Profit)/(Total Issue) as -14.92cps, which is way 
different to the -98.725cps you quote.    Has there been some sort of 
one off write down for the loss to increase to the figure you quote?
>
>              Price/Earnings Ratio:    -0.3950
>
Which gives a share price of 39c based on on eps of -98.725
or  5.9c based on an eps of -14.92cps
>
>             NTA/Share:      57.3344 (NZD) cents
>
So the share price is way below the net tangible asset backing in 
any case
>
>              Dividend/Share   0.0000 (NZD) cents
>              Dividend Yield:    0.0%
> 
The above would indicate it is either a growth or a recovery share
>
> The share price is currently  very close to 19 months high.
>
Which means that shareholder are more confident about a recovery now 
than at any time within the last 19 months.
> 
> Company B:
> 
>             Total Issue:   115,532,071
>              Full Year Profit:   3,827,000.00 (NZD)
>
>From that I calculate the eps as 3.31cps, which is close enough to 
what is quoted below
>
>              Earnings/Share:  3.0355 cents
>              Price/Earnings Ratio: 9.5536 
>
Which gives a share price of 29c
>
>              NTA/Share:   45.9898 (NZD) cents
>
which is again significantly below the asset backing.
>
>              Dividend/Share:   0.0000 (NZD) cents
>              Dividend Yield:     0.0%
>
Again no dividend means that it is either a growth or recovery stock.
> 
> The share price is at least 15 years  low.
>
If it has been going for 15 years, and the industry it is in has not 
substantially changed  it looks like a recovery stock. 

So since both companies are in the same industry and in New Zealand 
we can assume that both will be recovery stocks, at the bottom of 
their business cycles.
> 
> Just base on fundamentals. Which company will be your choice for
> medium to long term investment?
>
Based solely on the information you have given us, I would pick A.   
They have a bigger discount to their net asset backing and hopefully 
their huge write-off has put the business back on a sound 
financial footing for the future.
>
> Could you make comment  on your  decision?
> 
I wouldn't make a decision on the figures you quoted.   I would want 
a better explanation of what caused the earnings discrepency in the 
figures for Company A.   I would also want to look at information on 
company revenue streams, very important for companies that aren't 
turning a profit,-  and that you didn't provide. 

How did I do?
SNOOPY

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