Saturday, November 21, 2015

Low Debt/No Debt Stocks Selling Below Cash per Share

One of my favorite screens for stocks are the ones that are debt free. It's hard to go out of business when a company has no debt. If you can find a debt free company selling below book value (the value of the stock if the company goes out of business today, everything the company owns is sold off, and the company liquidates, with distributions to all shareholders), then it is very hard to go out of business.

And if the company has no debt and is selling below its cash per share, then it is extremely difficult to go out of business. Management would have to be spending money like a drunken sailer for that to happen (or the company could have reported fictitious numbers e.g. Enron).

So I take notice when I find stocks with no debt or very little debt and selling below cash per share. The cash per share is basically all the company's cash on hand and cash equivalents, divided by the number of shares of the company. If the company went out of business immediately, couldn't sell off any of its equipment, real estate, inventory, or other assets, and had cash per share to distribute to shareholders that exceeded the price of the stock currently, then a profit is almost guaranteed.

One example is Payment Data Systems (PYDS), a provider of integrated electronic payment processing services. The stock closed at 2.35 per share on Friday, yet has 5.40 per share in cash, a 3.05 discount to cash, or on a percentage basis, a 56.5% discount. The company trades at six times cash flow, and has a reasonable price to sales ratio of 1.78.

Another example is Emerson Radio (MSN), a marketer of houseware and consumer electronic products. The stock is trading at 1.04 per share on Friday, yet has 1.78 per share in cash, a 41.6% discount to cash per share. The company has a price to earnings ratio of 20.8, and an extremely favorable price to sales ratio of 0.43.

For a list of a dozen stocks that are trading below cash and are debt free or almost debt free, go to Keep in mind that most of these stocks are very low cap, and low priced, so therefore are very speculative.

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