- Joined
- 30 September 2012
- Posts
- 742
- Reactions
- 379
When I say distributable I mean cash that they are free to use as they please (ie. it is removable from the funding of the core operations). Capital return, dividend, fuelling future growth - that sort of thing.
Look at the balance sheet of TTA. Tell me what you see. How did their cash increase over the prior year figure?
If the cash is merely there to pay off a loan or it is required to meet working capital obligations then it is not removable.
In "net / net" type investing (and other forms of value investing, obviously) you want to get much more than for what you paid. That does not always mean cash, but cash is obviously more certain. Cash is liquid and you know immediately what it is worth.
Thanks Vespuria.
So free cash flow does not solve the problem? Cash from operations minus dividend payments and capex, from the cash flow statement?
This whole thread thus far has been based on what was being talked about in a couple of posts on page 8 of the thread I mentioned above.
I might have misunderstood what was meant, and that's what I've been exploring here. The idea was a learning experiment, as I couldn't understand why we were looking for just "cash" to be greater than market cap, without requiring anything else.
Seem that, like me - no one else in this thread can either!
Think I'll put "free cash flow" to bed for now!
I look at Graham's NCAV and obviously the net-net is similar - both subtract the total liabilities. But that wasn't mentioned in the other thread I've been referring to, or at least in the posts I'm referring to. As I said above, when I asked why we were looking at just cash: "I would subtract liabilities".
Just had a skim of the guru article. The P/B, P/E stuff is far more in line with my approach. I was wondering what made it "Graham-esque", but of course it's the tangible equity to total liabilities that makes it that. I don't really like incorporating dividends into the research, but I might take a look at that one.
Thanks for the constructive help Vespuria.