tag:blogger.com,1999:blog-8152901575140311047.post8250898918416695369..comments2024-03-29T05:33:33.027-04:00Comments on Musings on Markets: Enterprise value is negative... Is that possible?Aswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-8152901575140311047.post-47097533085666882852014-05-09T01:56:03.648-04:002014-05-09T01:56:03.648-04:00Thanks is PosibbleThanks is PosibbleInunzhttp://www.inunz.com/noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-29482927959570073252012-04-20T02:11:40.590-04:002012-04-20T02:11:40.590-04:00I enjoyed reading it. I require to study more on t...I enjoyed reading it. I require to study more on this topic. Thanks for sharing a nice info..Any way I'm going to subscribe for your feed and I hope you post again soon.jakarta hotelhttp://www.jakarta.intercontinental.comnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-15462492047676054102011-09-08T14:48:47.176-04:002011-09-08T14:48:47.176-04:00Sir, could you please explain how do we calculate ...Sir, could you please explain how do we calculate using the comparable companies analysis, the multiples of an unlisted company.Your answer would help me a lot for my internship in an investment bank.Sudhir Varma Kammilihttps://www.blogger.com/profile/14588191241738190618noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-75865487677456575952011-09-08T14:46:30.168-04:002011-09-08T14:46:30.168-04:00Sir, could you please explain how do we calculate ...Sir, could you please explain how do we calculate using the comparable companies analysis, the multiples of an unlisted company.Your answer would help me a lot for my internship in an investment bank.Sudhir Varma Kammilihttps://www.blogger.com/profile/14588191241738190618noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-72893472637432093782009-03-04T14:40:00.000-05:002009-03-04T14:40:00.000-05:00i'm running into the exact situation as sunil - us...i'm running into the exact situation as sunil - using comps to value a private entity, but all the EVs are negative. any thoughts?paul trieuhttps://www.blogger.com/profile/07344579978073420115noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-75691478791967012582009-01-16T06:47:00.000-05:002009-01-16T06:47:00.000-05:00HiThanks for this article on negative EV. I was al...Hi<BR/><BR/>Thanks for this article on negative EV. I was also facing this kind of issue for certain companies which we were considering as peer companies for one of the unlisted company which we are valuing. Now the question is what do we do in this kind of scenario, even after proper consideration of lease and other debt based securities, EV is negative because market cap is too low which is possible due to poor market condition and stocks are down like anything. Please suggest.Unknownhttps://www.blogger.com/profile/03794280841316789350noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-86225243166194968422009-01-16T06:44:00.000-05:002009-01-16T06:44:00.000-05:00This comment has been removed by the author.Unknownhttps://www.blogger.com/profile/03794280841316789350noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-52267461692592322902008-12-25T16:03:00.000-05:002008-12-25T16:03:00.000-05:00Prof- thanks for the article. this is very apt, gi...Prof- thanks for the article. this is very apt, given the current times. Lot of people are using such analysis to do bottom fishing in the market.<BR/><BR/>In fact, I have been using experimenting in market using following criteria<BR/><BR/>a)firms with ZERO long term debt on B/s - protects them from credit crisis. mostly consumer goods and tech companies will fall in this bracket-- they are "lesser" impacted by crisis.<BR/><BR/>b) then narrow down to firms with price to book value <1. <BR/><BR/>c) then look for firms with Cash/Share closer to Price/Share.. In some cases, there are Cash/Share higher then Price/Share, as u have pointed out.<BR/><BR/>d) and then look at at other aspects like mgt, prospects, goodwill present in B/s, institutional share holding etc of shortlisted firms meeting above 3 criteria.<BR/><BR/>do u think it makes sense... i dont expect you to comment on my investment methodology but theoretically does it makes sense.?arnavhttps://www.blogger.com/profile/08650629777163250255noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-21575803559049231562008-12-25T15:35:00.000-05:002008-12-25T15:35:00.000-05:00i guess ultimately where there exists sizeable ca...i guess ultimately where there exists sizeable cash (adjusted for debt)on the books of the company, the market cap will equate itself to the adjusted cash per share in the long run given decent fundamentals.dharmahttps://www.blogger.com/profile/17951684922920485754noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-3687481707302494162008-12-23T18:00:00.000-05:002008-12-23T18:00:00.000-05:00Thanks for the article. another reason for negativ...Thanks for the article. another reason for negative EV could be we're assuming a very low of operating cash and overestimating excess cash that we can net out to calculate the EV. most analysts seem to just use total cash. Also we see this phenomenon more in high tech historically than any other sector. Damodran.. any thoughts on how to interpret negative EV when stock markets are relatively stable?Priyahttps://www.blogger.com/profile/14032879708393488072noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-46875750883825982142008-12-12T14:45:00.000-05:002008-12-12T14:45:00.000-05:00A negative EV means that market is pricing the fut...A negative EV means that market is pricing the future growth at nothing/zero i.e which makes sense given that firms don't have visibility even into the next quarter. It could also imply that the liabilities of most of these firms maybe understated as in the case of Bank of New York Mellon (some ongoing Russian lawsuit)Unknownhttps://www.blogger.com/profile/09505187878911956816noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-60082600134942880362008-12-09T19:52:00.000-05:002008-12-09T19:52:00.000-05:00I have been looking at a number of companies recen...I have been looking at a number of companies recently that have negative enterprise value. It becomes more interesting because the sector also has zero debt (minimal operating leases and unconditional purchase obligations). There is some litigation taking place between the companies, but when I quantify it then I still get a zero enterprise value.<BR/><BR/>To add a little more complication to the mix, these companies are positive cash flow and have a very high component of variable cost in their business models.<BR/><BR/>Is there something obvious that I am missing?Unknownhttps://www.blogger.com/profile/04778508811455598816noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-92087634834627572172008-12-09T09:49:00.000-05:002008-12-09T09:49:00.000-05:00I am not saying that we cannot compute enterprise ...I am not saying that we cannot compute enterprise value for a retail firm. I just don't think it is done often enough. In fact, some analysts do add an approximation (8 times the lease expense) to debt to get to EV.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-72677801846042435262008-12-09T05:16:00.000-05:002008-12-09T05:16:00.000-05:00For the lease commitment that you are talking abou...For the lease commitment that you are talking about for Retail companies, isn't it possible to estimate a fair value for the damages that maybe claimed for breaking those lease contracts and then add it to the total debt, so that we get the true EV? I mean isn't that a very normal practice of Equity Analysts?Mahesh Sethuramanhttps://www.blogger.com/profile/01909074683189926487noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-89386891733350787352008-12-09T02:08:00.000-05:002008-12-09T02:08:00.000-05:00Thanks for the article. So I take it that the ori...Thanks for the article. So I take it that the original article ignores L2 and L3 off balance sheet entries, or just doesn't highlight the difficulty in proper valuation?<BR/><BR/>Whenever I hear a story like the one in question, my reaction is 'how can you possibly look at these companies in a vacuum'??<BR/><BR/>cheersHawgdriverhttps://www.blogger.com/profile/04458456648720855678noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-33657797772025388352008-12-09T01:27:00.000-05:002008-12-09T01:27:00.000-05:00Agree with the false lure created by negative ente...Agree with the false lure created by negative enterprise value. Almost all of the companies in the bloomberg list were Banks. Just because a company has a negative enterprise value doesn't justify investment. Its like asking to invest in Lehman or Bear Sterns right before they went bankrupt.shikhilhttps://www.blogger.com/profile/03246817753443758053noreply@blogger.com