Are There Really Stocks Selling Below The Cash per Share?

 

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: The author didn’t own any of the above at the time the article was written.

Stocks Going Ex Dividend the First Week of November

Here is our latest update on the stock trading technique called 'Buying Dividends,' also commonly referred to as 'Dividend Capture.' This is the process of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend. This technique generally works only in bull markets, and can work in flat or choppy markets, but you need to avoid the technique during bear markets.

In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks. WallStreetNewsNetwork.com has compiled a downloadable and sortable list of the stocks going ex dividend in the near future. The list contains many dividend paying companies, lots with market caps over $500 million, and yields over 2%. Here are a few examples showing the stock symbol, the ex-dividend date, and the yield.

Idacorp	IDA	11/3/2015	3.0%
Kansas City Life Insurance Co.	KCLI	11/3/2015	2.2%
Northwest Bancshares, Inc.	NWBI	11/3/2015	3.7%
S&T Bancorp	STBA	11/3/2015	2.3%
Xilinx	XLNX	11/3/2015	2.5%
Acacia Research Corp	ACTG	11/4/2015	7.2%
Ardmore Shipping Corporation	ASC	11/4/2015	8.6%
AVX Corp	AVX	11/4/2015	3.1%
Boeing Co.	BA	11/4/2015	2.5%
Boston Private Financial Hldgs	BPFH	11/4/2015	3.1%
Brookline Bancorp	BRKL	11/4/2015	3.1%
Capitol Federal Financial Inc	CFFN	11/4/2015	2.6%
CMS Energy	CMS	11/4/2015	3.2%
Central Valley Cmty Bancorp	CVCY	11/4/2015	2.1%

The additional ex-dividend stocks can be found at wsnn.com. (If you have been to the website before, and the latest link doesn't show up, you may have to empty your cache.) If you like dividend stocks, you should check out some of the other high yield stock lists at WallStreetNewsNetwork.com or WSNN.com. Most of the lists are free. 

Dividend definitions:

Declaration date: the day that the company declares that there is going to be an upcoming dividend.

Ex-dividend date: the day on which if you buy the stock, you would not be entitled to that particular dividend; or the first day on which a shareholder can sell the shares and still be entitled to the dividend.

Monthly Dividend Stock List
Record date: the day when you must be on the company's books as a shareholder to receive the dividend. The ex-dividend date is normally set for stocks at two business days before the record date.

Payment date: the day on which the dividend payment is actually made, which can be as long at two months after the ex date.

Book now available: Buying Dividends Revised and Expanded

Book now available: Stock Market Trivia Makes a Great Gift!

Don't forget to reconfirm the ex-dividend date with the company before implementing this technique.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com