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Message
Enterprise Value
Posted on 1/10/23 at 4:09 pm
Posted on 1/10/23 at 4:09 pm
Need some help understanding how to interpret this. Stock is trading at $00.01 (one cent) per share. It has a EV of $43.21. What does that tell me about the company and trading price ?
2
Posted on 1/10/23 at 4:22 pm to michael corleone
More importantly, why are you spending precious time, effort and money on a stock worth less than a rounding error?
Posted on 1/10/23 at 4:53 pm to Turf Taint
quote:
More importantly, why are you spending precious time, effort and money on a stock worth less than a rounding error?
This
but read this as it explains it well [link=(LINK)]https://www.wallstreetmojo.com/enterprise-value-formula/[/link]
Posted on 1/10/23 at 4:53 pm to michael corleone
Are these just an illustrative example or are you really looking at company that trades at $0.01 per share with a total EV of $43.21?
Anyways my (albeit limited) understanding is basically a starting place for how much it would cost to “buy” a company, and not just the total market cap but also accounting for net debt (debt - cash or liquid assets).
So a hypothetical using your example, if a company worth $0.01 per share and has a total supply of 4,000 shares, it’s total makes cap would be $40.00. If it then has $5.00 of debt but $1.79 in cash on hand, then the $5.00 would be added to the $40.00 and the $1.79 would be subtracted from it resulting in an EV of $43.21.
Anyways my (albeit limited) understanding is basically a starting place for how much it would cost to “buy” a company, and not just the total market cap but also accounting for net debt (debt - cash or liquid assets).
So a hypothetical using your example, if a company worth $0.01 per share and has a total supply of 4,000 shares, it’s total makes cap would be $40.00. If it then has $5.00 of debt but $1.79 in cash on hand, then the $5.00 would be added to the $40.00 and the $1.79 would be subtracted from it resulting in an EV of $43.21.
This post was edited on 1/10/23 at 4:54 pm
Posted on 1/10/23 at 5:01 pm to Turf Taint
It is a start up/new company. Their earnings have increased 6 quarters in a row and expenditures are low. They anticipate tripling earnings by Q 2 of this year. It’s one of those things where buying 5k of stock may turn into 25k or more in a few years. The spend is extremely small and has no impact on me if it tanks to 0.00. Just trying to understand what that figure means.
Posted on 1/10/23 at 5:20 pm to michael corleone
quote:This doesn’t make sense to me. If you’re spending $5k in stock, whether it’s 50 shares at $100 per share, or 500k shares at $0.01 per share, you’re still spending $5k and could lose $5k.
It’s one of those things where buying 5k of stock may turn into 25k or more in a few years. The spend is extremely small and has no impact on me if it tanks to 0.00. Just trying to understand what that figure means.
That said, while I avoid penny stocks, so I don’t even know if it’s possible to trade below a penny, it seems considerably more risky that there is a much lower floor even if it can, so it seems like a maximum loss is much more likely.
Even then, if this is being bought on some type of exchange, there is usually a bid-ask spread that’s at least a few cents. That’s not a huge difference for non-penny stocks, but it’s a huge difference when it’s literally trading for pennies, let alone a penny. So you may literally need to get 5-10x returns to just break even.
I don’t know. I would stay away from something like this, but that’s me. And I’m really confused why a start up is offering a $0.01 a share in stocks because it would be weird for it start out publicly traded, and it similarly seems weird to sell share at a $0.01 even if it’s private.
This post was edited on 1/10/23 at 5:22 pm
Posted on 1/10/23 at 6:31 pm to buckeye_vol
I guess my risk profile is different than yours. This is a minimal amount I. The grand scheme of things and means nothing if I lose all of it. My question related only to the meaning of EV and whether it had a relation to the price. I know the last 6 quarters of earnings, what they make, what they own and their debt. Those numbers are sound and indicate to me this will go up.
Posted on 1/10/23 at 6:51 pm to michael corleone
I've bought stocks that traded less than a penny and made money but I've been through years of the school of OTC hard knocks.
Enterprise value is a function of market cap so a stock could have a miniscule price but still have a high market cap because of a gazillion shares outstanding. And enterprise value does take into account debt and cash so you want a positive EV but whether a stock with an EV of $43 million is a metric of a potentially good deal depends on the market cap.
What's the ticker?
Enterprise value is a function of market cap so a stock could have a miniscule price but still have a high market cap because of a gazillion shares outstanding. And enterprise value does take into account debt and cash so you want a positive EV but whether a stock with an EV of $43 million is a metric of a potentially good deal depends on the market cap.
What's the ticker?
This post was edited on 1/10/23 at 6:52 pm
Posted on 1/10/23 at 6:57 pm to Diseasefreeforall
quote:If the EV is $43.21 million then that would make more sense, although either they have billions of shares or tens of millions in debt, but he said:
EV but whether a stock with an EV of $43 million
quote:which I interpreted an EV worth less than $50 total.
It has a EV of $43.21.
Posted on 1/11/23 at 8:02 am to michael corleone
quote:
They anticipate tripling earnings by Q 2 of this year.
How often does this type of projection work out as good or better than anticipated?
Posted on 1/11/23 at 8:07 am to michael corleone
What stock is it bruh? I’m kind of the expert around here since at is with the lord now
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