Calculating $ value per share

[Nero64]

Hi,

I was wondering how you calculate the $ value per share of a stock based on free cash.

For example, the other day I read about a company that has 60 million in cash.

Its market cap is 87 000 000

Is this how they calculate it or am I way off base.

87 000 000 (market cap) / 1.23 (current share price)

= 70 731 707 (Num of shares)

60 000 000 (Free cash) / 70 731 707 (Num of shares)

= 85 cents

Therfore the company has 60 000 000 free cash which equals to 85c per share

And if this is the case then the current share price of $1.23 is worth $2.08 and is trading at a heavy discount.

 

[skc]

Hi,

I was wondering how you calculate the $ value per share of a stock based on free cash.

For example, the other day I read about a company that has 60 million in cash.

Its market cap is 87 000 000

Is this how they calculate it or am I way off base.

87 000 000 (market cap) / 1.23 (current share price)

= 70 731 707 (Num of shares)

60 000 000 (Free cash) / 70 731 707 (Num of shares)

= 85 cents

Therfore the company has 60 000 000 free cash which equals to 85c per share

And if this is the case then the current share price of $1.23 is worth $2.08 and is trading at a heavy discount.

- The market cap already includes the value of the cash. That is, the share price $1.23 includes $0.85 cash, and $0.38 for the rest of the firm.

- Sometimes cash is not valued dollar for dollar. Some company has cash well exceeding their market cap, this means the market thinks the management will squander the cash rather than generating a good return for shareholders. There is a thread on this forum where these companies are listed. Other times, cash is valued at above dollar for dollar - early days Google and some cash-box companies in the boom times were some examples. This means the market thinks the company can spin the cash into higher shareholder value.

- Are you sure the cash is net cash? or is it just cash at hand? A company can have cash of $100m, but they have debt of $40m. So the shareholders are really entitle to the remainder $60m of net cash.