Company X trades at 2X cash?

[pattern39]

What does it mean when a TSX company trades at 2X cash? How would one go about finding out the cash reserve of a company? Are they updated on demand or in quarterly statements? If quarterly statements, how and where would one go to access them (other than company website)?

[ccyk]

What does it mean when a TSX company trades at 2X cash? How would one go about finding out the cash reserve of a company? Are they updated on demand or in quarterly statements? If quarterly statements, how and where would one go to access them (other than company website)?

say company X, net cash position is $100M
if it trade at 2x cash its market cap is $200M
if it has 33M share outstanding, then its share price is $6.06 per share

quickest way to find out up-to-date cash position is from company's presentation, if outdated, still quicker to look for quarterly FS in comapny website and search for balance sheet.
or just dig it up from financial sites such as yahoo or bloomberg, but may not be accurate.
another way is to find it from sedar, just google it.

[pattern39]

Assets

Current assets
Cash and cash equivalents ---> $369,350 <--- Is this "net cash"???
Accounts receivable and prepaids ---> 37,978
Inventories ---> 40,423
Due from non-controlling interest ---> 6,100
Sum ---> 453,851

Non-current assets
Due from non-controlling interest ---> 61,566
Property, plant and equipment ---> 297,935
Sum ---> 359,501
Total assets ---> $813,352

Liabilities and equity

Current liabilities
Accounts payable and accrued liabilities ---> $19,029
Dividends payable ---> 9,976
Income taxes payable ---> 52,343
Sum ---> 81,348

Non-current liabilities
Deferred income taxes ---> 12,638
Provision for closure and reclamation ---> 13,539
Sum ---> 26,177
Total liabilities ---> 107,525

**********************

For net cash, which number are we looking at (is it "Cash and cash equivalents"?)

[Mark77]

With consolidated accounting, you have to be careful as to what 'cash and cash equivalents' means. Its easy to consolidate the cash balance of a foreign subsidiary into the balance sheet, but such 'cash' cannot be brought back and paid out as a dividend without paying corporate income tax on it.

Also, current liabilities are always 100% of stated for a company that is going to be viable on a go-forward basis, while current assets and even 'cash' can be subject to impairments. Some firms enter into off-balance-sheet arrangements that may have the effect of exxagerating cash, while hiding contingent liabilities. I would suggest that one should be suspicious of a company that claims to have massive cash reserves, and no coherent explanation for why they are hoarding such reserves rather than paying them out to shareholders or buying back stock.

Nobody has ever gone bankrupt by questioning irrational behaviour. And at the end of the day, an investor should question whether they want to be buying a bunch of cash, or whether they want to be purchasing productive assets. Or worse, whether they want to be involved in a "black box" that is not transparent with its business plans. This is why I avoid the tech sector, in particular the companies that give away massive amounts of free stuff, yet claim to have tons of cash.

[ccyk]

Assets

Current assets
Cash and cash equivalents ---> $369,350 <--- Is this "net cash"???
Accounts receivable and prepaids ---> 37,978
Inventories ---> 40,423
Due from non-controlling interest ---> 6,100
Sum ---> 453,851

Non-current assets
Due from non-controlling interest ---> 61,566
Property, plant and equipment ---> 297,935
Sum ---> 359,501
Total assets ---> $813,352

Liabilities and equity

Current liabilities
Accounts payable and accrued liabilities ---> $19,029
Dividends payable ---> 9,976
Income taxes payable ---> 52,343
Sum ---> 81,348

Non-current liabilities
Deferred income taxes ---> 12,638
Provision for closure and reclamation ---> 13,539
Sum ---> 26,177
Total liabilities ---> 107,525

**********************

For net cash, which number are we looking at (is it "Cash and cash equivalents"?)

nope, it is just cash, net cash is cash like items less all debts
369350-107525 is net cash

[charliebrown]

nope, it is just cash, net cash is cash like items less all debts
369350-107525 is net cash

that's a bit conservative...unless you quoted the wrong number.

i'd say net cash = cash - loans & mortgages (both current & long term)
(as opposed to total liabilities)

in the sample balance sheet, i dont see any debt. (A/P ie hydro bills isnt really like debt ie mortgage on your house)

It does raise questions as to why a company is sitting on so much cash though

[ccyk]

that's a bit conservative...unless you quoted the wrong number.

i'd say net cash = cash - loans & mortgages (both current & long term)
(as opposed to total liabilities)

in the sample balance sheet, i dont see any debt. (A/P ie hydro bills isnt really like debt ie mortgage on your house)

It does raise questions as to why a company is sitting on so much cash though

i dont think thats conservative. what you describe is more like net debt

tones of reason why they hold so much cash:
building reserve for dividend-typically 1 year of reserve
wait for major capex project for miners or other farm-in opportunities, typical for oil companies
to prevent HTO by competitors
to fund HTO of competitors
etc
etc

I really really like cash rich companies, especially when it is hard to rise capital right now. market often overlook them.

[Mark77]

ccyk, cash is required for miners/oil companies for margin requirements. Most miners/oil companies will sell some of their production before-hand. There's even been situations theorized that if commodity prices went through the ceiling, that some mining companies would actually face bankruptcy because they simply can't get a commodity out of the ground fast enough and delivered against contracts to sell at a low price before the margin calls start arriving.