Tag: cash per share

Three Stocks Selling Below Cash per Share

by Fred Fuld III

Cash per share is a financial metric used in stock fundamental analysis to assess a company’s financial health and its ability to meet its short-term obligations. It represents the amount of cash a company has on hand per outstanding share of its common stock. This metric is calculated by dividing the total cash and cash equivalents a company holds by the number of outstanding common shares.

Cash per share is important in fundamental analysis for several reasons:

  1. Liquidity Assessment: It provides insights into a company’s liquidity, indicating how much cash is readily available to cover its immediate financial needs. Higher cash per share suggests better liquidity and a lower risk of financial distress.
  2. Risk Mitigation: Companies with a significant cash reserve per share are better positioned to weather economic downturns, financial crises, or unexpected expenses without resorting to debt or diluting shareholder equity.
  3. Investor Confidence: A high cash per share ratio can enhance investor confidence, as it signals that the company has the financial flexibility to invest in growth opportunities, pay dividends, or repurchase shares.
  4. Acquisition Potential: Companies with substantial cash per share are often viewed as attractive targets for mergers and acquisitions, as their cash reserves can be used to fund such activities.
  5. Capital Allocation: It can assist investors in evaluating a company’s capital allocation strategy. If a company is accumulating cash but not deploying it effectively, it may indicate that management lacks a clear plan for growth or shareholder value creation.
  6. Comparison: Cash per share can be used to compare a company’s financial strength with that of its peers in the same industry or sector. It helps investors identify companies with relatively stronger cash positions.

It’s important to note that while a high cash per share ratio can be a positive sign, excessively hoarding cash without deploying it effectively can be detrimental to shareholder returns. Investors typically consider cash per share in conjunction with other financial metrics and factors, such as earnings, debt levels, and the company’s overall business strategy, to make informed investment decisions.

In summary, cash per share is a fundamental metric that provides insights into a company’s financial strength, liquidity, and ability to weather economic challenges. It plays a crucial role in evaluating a company’s financial health and investment potential.

To give a specific example, if a company goes out of business today, and it’s stock is debt free and selling for less than the cash per share, even if all its real estate, machinery, inventory, and everything else is worthless, the shareholder would be guaranteed to make money.

You may wonder if you can still buy stocks selling below cash. Here is one example.

Origin Materials (ORGN), with a market cap of $202.4 million, is trading at 93% of the cash per share.

Origin Materials, Inc., founded in 2008 and headquartered in West Sacramento, California, is a company dedicated to the development and commercialization of sustainable materials and chemicals.

Their primary focus revolves around producing carbon-negative materials and chemicals using renewable feedstocks sourced from non-food biomass, such as wood and agricultural residues.

By leveraging innovative technologies, Origin Materials aims to create products with a net-negative carbon footprint, meaning they remove more carbon from the atmosphere than is emitted during their production. The company collaborates with various partners, including major consumer brands and chemical companies, to incorporate their sustainable materials into a wide array of products.

Origin Materials’ mission centers on environmental sustainability, offering eco-friendly alternatives to conventional materials and contributing to the reduction of industries’ environmental impact.

The stock has a reasonable price to earnings ratio of 7.69, and is selling at 53% of book value.

If you are looking for a stock with a larger market cap, and if you think the market for commercial real estate has bottomed out, Equity Commonwealth (EQC) is a real estate investment trust with a market cap of $2.07 billion. The stock is selling at 96% of its cash per share.

This REIT invests in commercial office properties and is based in Chicago.

The company is debt free, trades at 33.4 times earnings, and is trading at 92% of book value.

If you are looking for very high risk, ClearOne (CLRO) is a penny stock with a market cap of $19.57 million.

ClearOne, Inc. is a communication solutions company headquartered in Salt Lake City, Utah, USA, with a history dating back to its founding in 1983. Specializing in audio and visual collaboration technologies, ClearOne has established itself as a prominent player in the industry.

The company’s core focus revolves around providing cutting-edge solutions designed to enhance communication and collaboration in diverse professional settings.

ClearOne offers a comprehensive suite of products and services tailored for improving communication quality, whether in corporate conference rooms, educational institutions, huddle spaces, or remote work environments. This includes audio conferencing solutions, video conferencing systems, collaboration software, professional audio-visual integration capabilities, and unified communications integration.

ClearOne has earned recognition for its patented technologies in echo cancellation, noise reduction, and audio processing, all contributing to the enhancement of audio quality.

Their mission is to simplify and elevate communication experiences for businesses, educational institutions, and government organizations, fostering productivity and seamless interaction.

The company has no long term debt, a very low P/E ratio less than 2, a decent price sales ratio of 0.98, and sells for 45% of book value.

Please note that while a low price-to-cash ratio may indicate good value, it should not be the sole factor considered in investment decisions. Conducting thorough research and due diligence, evaluating the company’s fundamentals, assessing its competitive position, and considering other financial metrics are essential to make solid investment choices.

Disclosure: Author didn’t own any of the above at the time the article was written. These stocks are very low cap and should be considered extremely speculative.

Are There Really Stocks Selling Below Cash per Share? Yes!

by Fred Fuld III

The cash per share is a financial metric that measures the amount of cash a company has per outstanding share of common stock. It is calculated by dividing the total cash and cash equivalents of a company by the number of outstanding shares.

The significance of the cash per share lies in its ability to provide insights into a company’s liquidity and its ability to cover short-term obligations. A higher cash per share indicates that a company has a larger cash reserve available to meet its financial commitments and is generally seen as a positive sign. It suggests that the company is well-positioned to handle unexpected expenses, fund its operations, pay dividends, or invest in growth opportunities.

Investors and analysts often use the cash per share as one of the indicators of a company’s financial health and stability. It can be compared across different companies within the same industry or used to assess a company’s performance over time. However, it’s important to consider the context of the industry and the company’s business model since different industries may have different capital requirements.

While a high cash per share can be seen as a positive signal, an excessively high amount of cash may also indicate that the company is not effectively deploying its cash. It might suggest that the company is not investing in growth opportunities, paying off debt, or returning value to shareholders through dividends or stock buybacks. Therefore, it’s crucial to consider other financial metrics and factors when evaluating a company’s overall financial health and investment potential.

The price-to-cash ratio (P/C ratio) is a financial metric that compares a company’s market price per share to its cash per share. It is calculated by dividing the market price per share by the cash per share.

The P/C ratio is used to evaluate the valuation of a company’s stock relative to its cash reserves. It provides insights into how the market values a company’s cash position. A lower P/C ratio suggests that the company’s stock is relatively undervalued compared to its cash holdings, while a higher P/C ratio indicates that the stock may be overvalued.

Investors and analysts use the P/C ratio as one of the valuation metrics to assess investment opportunities. However, it’s important to note that the P/C ratio should not be analyzed in isolation but should be considered alongside other fundamental and financial factors.

In simple terms, imagine that a stock is selling for $5 per share, and the company has cash per share of $10. If the company was debt free and went out of business today, and all the other assets of the company (such as real estate, machinery, inventory, etc.) were totally worthless, the investors would still double their money due to all the cash.

Obviously this is an extreme example, but having more cash per share than what the stock is trading at can provide a huge cushion.

Buying stock in companies with a low price-to-cash ratio can have several potential advantages. Here are a few reasons why investors might find it advantageous:

  1. Value Investing: A low price-to-cash ratio is often associated with value investing, which involves seeking stocks that are undervalued by the market. Investors who follow this approach believe that the market may have overlooked or undervalued the company’s cash reserves, leading to a potential buying opportunity. By purchasing stocks at a lower price relative to the company’s cash position, investors aim to benefit from a potential increase in stock price as the market recognizes the company’s underlying value.
  2. Margin of Safety: Investing in companies with a low price-to-cash ratio can provide a margin of safety. The cash holdings of a company act as a financial cushion, providing stability and reducing the downside risk. If the market price of the stock declines, the cash reserves can provide a buffer and support the stock’s value. This can be particularly appealing to risk-averse investors who prioritize capital preservation.
  3. Potential for Special Situations: Companies with low price-to-cash ratios may present special situations that could unlock value for investors. For example, a company with a substantial cash position may be in a position to initiate a dividend payout, engage in share buybacks, or make strategic acquisitions. These actions can signal confidence in the company’s prospects and have a positive impact on stock price.
  4. Flexibility for Growth and Opportunities: Companies with ample cash reserves have the flexibility to pursue growth opportunities, invest in research and development, or weather economic downturns. A low price-to-cash ratio may indicate that the market has not fully recognized the potential for future growth or the strategic advantage of the company’s cash position. By investing in such companies, investors can potentially benefit from future growth and value creation.

So do these companies exist? Yes, but unfortunately, most are extremely low capitalization stocks.

Acacia Research Corporation (ACTG) is headquartered in Newport Beach, California. It specializes in acquiring and licensing patented technologies. Established in 1993, the company’s primary focus is on monetizing intellectual property by partnering with inventors, patent owners, and research institutions. Acacia Research Corporation operates through various subsidiaries, including Acacia Research Group LLC, Acacia Patent Acquisition LLC, and Acacia Patent Acquisition Corporation, each specializing in different technology sectors.

The business strategy involves identifying patent portfolios with licensing potential, negotiating agreements with companies that may be infringing on those patents, and generating revenue through licensing fees, settlements, and royalties. Additionally, the company may pursue legal enforcement actions, such as filing lawsuits, to protect patent rights and seek damages. Acacia Research Corporation also manages its own investment portfolio of intellectual property assets, actively seeking opportunities to acquire patents from inventors and other intellectual property owners.

Acacia Research has a market cap of $248 million and a sky high forward price to earnings ratio of 204. However, this company, which has no long term debt, has $7.83 in cash per share but last traded for $4.08 per share, giving it an outstanding price to cash ratio of 0.52.

Allied Gaming & Entertainment Inc. (AGAE) is a provider of entertainment and gaming products worldwide.

It is an extremely low cap company at $37 million. This debt free company has $2.04 in cash per share but last traded at 95 cents per share, giving it an excellent price to cash ratio of o.47. It is currently generating negative earnings.

LGL Group, Inc. (LGL) based in Orlando, Florida, operates as a diversified holding company in the electronics manufacturing industry. With a history dating back to 1917, LGL Group primarily focuses on providing electronic components and solutions to various industries.

The company operates through its subsidiaries, including MtronPTI and Precise Time and Frequency, Inc. MtronPTI specializes in the design and manufacturing of frequency control devices, oscillators, and filters, catering to sectors such as aerospace, defense, telecommunications, medical, and instrumentation. PTF, on the other hand, specializes in precision time and frequency references and network synchronization solutions.

LGL Group’s products find applications in telecommunications infrastructure, ensuring reliable timing in networks, while the aerospace, defense, medical, and instrumentation industries rely on their solutions for mission-critical applications. The company emphasizes research and development to drive innovation and maintain quality in its offerings.

This debt free company is also extremely low cap at $25 million, however it has a favorable forward price to earnings ratio of 12.35. It has a decent price to cash ratio of 0.66.

It’s important to note that while a low price-to-cash ratio may indicate potential value, it should not be the sole factor considered in investment decisions. Conducting thorough research, evaluating the company’s fundamentals, assessing its competitive position, and considering other financial metrics are essential to make well-informed investment choices.

Disclosure: Author didn’t own any of the above at the time the article was written.

Stocks Selling for Less than Cash per Share

by Fred Fuld III

During the last six months, the stock market has taken a tumble, with the S&P 500 down almost 20% year-to-date.

Some investors and traders are now looking for bargains, hoping for a short term or even a long term bounce.

So how do you go about choosing a stock to buy in these volatile times? One strategy is to look for stocks that are not only selling below their book value, but also below their cash per share, especially if the company has low or no debt.

The cash per share is the amount of money that would be distributed for each share if the company went out of business today. In other words, if all the other company’s assets were totally worthless, how much would shareholders receive for each share, just from the cash in the bank the company has.

So if you can buy the stock for less than the cash per share, you should be getting a fairly good deal, not counting other factors.

If the company is also profitable, that is another benefit.

The following are four stocks with have low or no debt, are trading below the cash per share, and are profitable with price to earnings ratios below 32. As a matter of fact, three of the companies have P/E ratios below 15. All of the following are low cap or extremely low cap, so should be considered very, very speculative.

Atea Pharmaceuticals, Inc. (AVIR), with a market cap of $577.00 million,  is a biopharmaceutical company, which is involved in the development of antiviral therapeutics for patients suffering from viral infections. The stock has a reasonable P/E of 14.02, debt amounting to 2.88 million, and is currently selling for 17% below its cash per share.

Rubicon Technology, Inc. (RBCN) is an Illinois based company, involved in the production of monocrystalline sapphire for applications in optical and industrial systems. It has a market cap of $22.61 million. The P/E ratio is 30.63 and the company has no debt. It is selling for 15% below cash.

Sesen Bio, Inc. (SESN), based in Cambridge, Massachusetts, develops  targeted fusion protein therapeutics for the treatment patients with cancer.  The market cap is $163.72 million and the P/E is 3.23. The company only has $100,000 in debt.  The stock is selling at 4% below cash.

SunLink Health Systems, Inc. (SSY) is a provider of healthcare products and services, and is based in Atlanta, Georgia. It has an extremely low, and therefore extremely speculative, market cap of only $7 million. The P/E is 1.47  and the amount of debt is $1.31 million. The stock is selling for 1% below cash.

As previously mentioned, all these stocks should be considered extremely speculative. Remember, often stocks sell for a very low price for a reason.

Disclosure: Author didn’t own any of the above at the time the article was written. No investment recommendations are expressed or implied. 

Buying Stocks Below Their Cash Value

Do you think a return of 56% over a period of less than two years is pretty good? How about 115%? Those are the actual returns of stocks that you could have bought less than two years ago that were selling for less than the cash per share.

What is cash per share?

In simple terms, cash per share is the amount of cash the company has sitting in the banks divided by the number of shares. So if the company has little or no debt, and you can buy the stock below the amount of cash per share, you are getting a bargain. If the company went out of business today and all the inventory and equipment and all other assets were totally worthless, you would still make a profit because the cash you would receive for each share would exceed the price you paid.

Real Life Examples of Stocks that were Selling Below Cash

Let’s get back to those real life examples mentioned in the first paragraph of this article. MEI Pharma (MEIP) is an oncology company focused on the clinical development of therapeutics to treat cancer. Back in November of 2015, the stock was selling for 1.64, yet it had cash per share of 1.70, providing a discount to investors of 3.5% to the cash. Since that time, the stock has risen to 2.57, a gain of 56.71%. Not a bad investment for less than a couple years. Then there is Support.com (SPRT), a provider of cloud-based software and services. In November 2015, it was trading at 1.09, with cash per share of 1.25, a 12.8% discount to cash. The stock is now trading for 2.35, a spectacular gain of 115.6%.

But what about companies that have a reverse split?

This is a great question. Let’s look at bebe (BEBE), the women’s clothing company, over the same time frame as the previously mentioned stocks. It was trading at a 22.6% discount to cash. Back then, the stock was trading at 0.41 per share, but the company had a 10 for 1 reverse split in December of 2016. What this meant was that for every 10 shares that you own prior to the split, you would now only have one share. So the effective cost basis of the original purchase price would be 4.10. The stock is now at 5.48, giving investors a 33.66% return. (To clarify this, assume you buy 1,000 shares at 41 cents, for a total cost of $410. The reverse split takes place, you now only have 100 shares at 5.48 or $548 total value, a gain of over 33%.)

Does the stock need to trade at a huge discount to make money?

Absolutely not. Here is a great example. GenCorp Industries (GENC) traded at a 0.1% discount to cash, actually one penny below the cash per share. The stock has gone from 10.18 to 17.95 a share, a very decent gain. But that’s not all. The stock declared a 3 for 2 stock split (what I call a “good stock split”) in July of 2016, which was effectively a 50% stock dividend. In other words, one and a half shares for every one share that you own. So the true gain on this stock from November 2015 is an incredible 76.33%.

Risks of Buying Below Cash Stocks

  • Possibility that the company is what we used to call the “walking dead” and what we now call “zombies”. These are companies that will continue to stumble along, never really grow but never go out of business, and they’ll just hold on to all their cash
  • Possibility that management may spend the company’s cash like a drunken sailor.
  • For biotech companies, the possibility that they will burn all their cash before they come out with an FDA approved drug

Advantages of Buying Below Cash Stocks

  • Provides a downside cushion for the stock price
  • In the event of bankruptcy or liquidation, excellent chance of getting back more money than your investment
  • Provides the company with a solid balance sheet -they can easily make payroll, buy new equipment, make acquisitions, without having to borrow

But the stock market is trading at lofty levels

Are there still stocks that can be purchased for less than cash per share? Yes, there are actually over 20 different companies with stock prices below cash per share with little or no debt. Here is just one example. The Rubicon Project (RUBI), is a Los Angeles based technology and software company. The stock recently closed at 3.70 per share, but has cash per share of 6.47, providing a discount to cash of 42.81%. The company is currently generating negative earnings, but has a very favorable price to sales ratio of 0.78 (a number below 1 is good, a number above 2 is not so good), and an excellent price to book of 0.65. Revenues have increased every year since 2012 and for the latest fiscal year, revenues jumped by about 12%. The company is debt free.

So what are some other companies selling below cash?

WStNN.com has come up with a list of almost two dozen companies that are currently trading below their cash per share, and have little or no debt. If you are interested in getting this list, just subscribe to our newsletter. We will be emailing the list in an Excel format to all subscribers who have subscribed by 11:59 pm on Friday, October 13. The list, which will be sent out the following day, will provide the following:

  • Company name
  • Stock ticker symbol
  • Country where the company is based
  • Price per share
  • Cash per share
  • Percentage discount to cash
  • Debt, if any

However, you must subscribe by October 13 in order to get this free list. The reason why we have this short timeframe is that the information may become stale a month from now, and we want you to get timely information.

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Is the Stock Market Overpriced When You Can Still Buy Stocks Below Cash?

If an investor is looking for stocks with favorable fundamentals, one of the best is the cash per share ratio. What this refers to is the amount of cash that would be distributed for each share if the entire company were liquidated today, and the proceeds divided among all the shareholders. That amount of cash would then be compared to the current price per share. If the stock is trading for less than the amount of cash per share, then it is a bargain.

In addition, if the stock has no debt, then it is even a better bargain, because in the event of liquidation, no loans would have to be paid off; all proceeds would go to the shareholders. With no debt and lots of cash, it’s hard for a company to go out of business, unless management spends money like drunken sailors.

The big question is, do such stocks exist? Here are a few.

Barnwell Industries, Inc. (BRN) is a producer and distributor of natural gas in Canada. The cash per share is 2.25 per share, yet the stock sells for only 1.55. This debt free company trades at 26 times trailing earnings. The stock also has a very favorable price to sales ratio of 0.87 and about a 23% discount to book value.

Chimerix, Inc. (CMRX) is a biotech company involved in the development of oral antivirals. This debt free stock, which is currently trading at 4.71 per share, has 5.90 in cash per share. The company is currently generating negative earnings, but on the positive side, it has a price to book value of 0.73.

Support.com (SPRT) is a provider of cloud-based software and services. The debt-free stock has total cash per share of 1.05, yet sells for 87 cents per share. Earnings have been negative.

Potential investors should be aware that all of the above are low cap companies and should be considered very speculative. If you like interesting stock lists like this, check out the menu at the top of this page.

Disclosure: Author didn’t own any of the above at the time the article was written.