i want to figure out how much a share in a company is really worth based on just the assets, is it just total equity divided by the number of shares? and for example would the santos balance sheet be in us dollars. and is the total number of shares: fully paid ordinary shares, and also is the total equity santos ltd or consolidated? http://www.santos.com/library/Santos_Annual_Report_2007_Financials.pdf
Value of a share based on assets?
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Garpal Gumnut
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Its a very good question mate and hopefully the funnymentalists on the forum will answer. One of my work cars was worth $28000 last night. This morning it wouldn't start, but eventually did. Its been hard to start all day. The battery is ok.
I wonder how much it is now worth.
That's my problem with fundamental analysis, and why I'm a chartist, but I'd be interested in replies to an excellent question.
gg
Essentially you are correct, and would use the consolidated entity (since Santos owns a lot of other companies). What most analysts use, however, is not just net assets (i.e equity), but net tangible assets. This excludes things such as brand names, and goodwill.. which often have suspect worth.
That's an odd example to give. A fundamentalist would have to essentially give an estimate on the impact to your earnings, how much it could take to fix, and discount it from the share price.
How would a chartist deal with this? A true hardcore chartist wouldn't budge on a strong uptrend even if the car exploded! Which is why I think we're all a little fundamentalist at heart..
Garpal Gumnut
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I'm a simple fellow I suppose. A vehicle is like a company, the sum of its parts rolling along, individual parts are easy to value, but when things go wrong and you know they are going wrong, the value of the vehicle falls, and this is reflected on the charts, not on the financials which state the value of the vehicle.
gg
I understand what you're getting at. The financial statements are always behind, so at worst they are roughly 6 months behind any impaired assets. But fundamental analysis is not the same as financial statements.
Essentially Chartists (or Technical analysis) believes in price trends, whereas fundamental analyst believes in underlying value (example I mentioned above). Most people will be both, but lean more to one or the other.
hi stl
here is a link to a site which may give you the information you are after. it is just one of many
http://www.tradingroom.com.au/apps/qt/quote.ac?code=AAE§ion=quotedetail&submit=Go%21
Thanks mate that looks like a great tool.
Garpal Gumnut
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Funny I would of said the same about technical
Garpal Gumnut
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Ok ... good question.
First thing to ask yourself is .. what is value?
Value can have many meanings... Fire Sale Value, Orderly Sale Value, Replacement Value, etc, etc... ie there are many ways to set a criteria on value ... ie you have a FMG size iron ore field.. but no access to railline.. block next door with no minerals has access to railline.. you will value it at a much higher price than most other people. etc.. so assume you mean bust up ,flog off value?
You have to go through the balance sheet and read the finacial report , ring the company up, think logically etc to ascertain exaclty whats on there.
Cash is easy to value..
Debtors , well that depends on whether their provisions for defaults is correct.. ie ive seen debtors on a balance which are 10 years over due.. whats the prospect of collectng that etc..so how old are the debts? how collectable they are etc...whether debtors amount is all made up of small debtors or mostly all due from one customer etc.. what if they default etc..
Plant etc... if it a bridge in the midde of no where .. who you going to sell that to someone?...unless someone buy's the whole company as a going concern its value could well be scrap metal or zero...land , houses are easier to value..in most as...etc... but the carrying value on the BS compared to mrket may be different ... ie try flogging a shopping mall in these depressed times... you wont get what you could have received 2 years ago now.. etc
anyway could babble on for a long time..but hope this gives you some idea... some companies reports made for you to understand... some made to make it impossible for you to understand.. these comapnies are usually the ones in trouble etc or where a few shifties are going on...
anyway lots of books on it if you are interested...
First thing to ask yourself is .. what is value?
Value can have many meanings... Fire Sale Value, Orderly Sale Value, Replacement Value, etc, etc... ie there are many ways to set a criteria on value ... ie you have a FMG size iron ore field.. but no access to railline.. block next door with no minerals has access to railline.. you will value it at a much higher price than most other people. etc.. so assume you mean bust up ,flog off value?
You have to go through the balance sheet and read the finacial report , ring the company up, think logically etc to ascertain exaclty whats on there.
Cash is easy to value..
Debtors , well that depends on whether their provisions for defaults is correct.. ie ive seen debtors on a balance which are 10 years over due.. whats the prospect of collectng that etc..so how old are the debts? how collectable they are etc...whether debtors amount is all made up of small debtors or mostly all due from one customer etc.. what if they default etc..
Plant etc... if it a bridge in the midde of no where .. who you going to sell that to someone?...unless someone buy's the whole company as a going concern its value could well be scrap metal or zero...land , houses are easier to value..in most as...etc... but the carrying value on the BS compared to mrket may be different ... ie try flogging a shopping mall in these depressed times... you wont get what you could have received 2 years ago now.. etc
anyway could babble on for a long time..but hope this gives you some idea... some companies reports made for you to understand... some made to make it impossible for you to understand.. these comapnies are usually the ones in trouble etc or where a few shifties are going on...
anyway lots of books on it if you are interested...
Wow that's alot of intereting information, guess it shows how little I really know and how much work I have left ahead of me, allthough I still think it is a sound stratergy of using the net equity and profit to make a price that you think is fair, thanks again
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A share in a company is worth what you can sell it for...
You could work out the book value per share, but this will not have much of an impact on the share price.
Consider a takeaway food caravan Trading as TAFC Pty Ltd:
Assets:
Caravan $10,000
Buns $1,000
Hot Dogs $5,000
Liabilities:
Caravan Loan $10,000
Owner's Equity $6,000
(Say 100 Shares)
from this you might think that each share is worth $60
But what if the P+L looks like this:
Revenue $500,000
COGS $250,000
Gross Profit $250,000
Expenses
Rent $10,000
Wages $100,000
Net Profit $140,000
Less Tax $40,000
NPAT $100,000
Therefore for each share you'd get a $1000 franked dividend... so they are not worth $60....
The Theoretical Market Value of a share is basically the net present value of all predicted dividends from the company, into perpetuity...
The Book Value is simply the A-L=OE value from the balance sheet, which doesn't really even reflect the market values of the assets of the company... EDIT: Ie if you have a car on the balance sheet at $10,000 but could only sell it for $5,000
