Liquidation value per share - Is it important? - Aussie Stock Forums

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  1. #1

    Default Liquidation value per share - Is it important?

    Say I have a stock which has

    Assets: 20 000 000
    Liabilities: 5 000 000

    So if the company folded it would have 15 000 000

    Now say the company has 50 000 000 shares outstanding

    That would be a value of 30c per share.

    Say the share is trading at 70c

    You would say that the share at current price is overvalued and not a good buy.

    Is this how the fund managers do their fundamental analysis when considering to buy shares.

    Is this really important in a market which is based on sentiment and raw emotion?


  2. #2
    Mod: Call me Dendrobranchiata prawn_86's Avatar
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    Default Re: Liquidation value per share - Is it important?

    That would be the first of many steps when fundamentally valuing a share.

    It may or may no be overvalued. It depends on cashflow, growth prospects, management etc etc

    Over the longer term, in theory, the emotion is supposed to balance out, but shares will almost always be above or below "fair value" as everyone has a different opinion, and risks, and required returns.

  3. #3

    Default Re: Liquidation value per share - Is it important?

    The stock market is forward looking mechanism. Yes the liquidation value would probably have some impact, but one would think the future outlook of the company would give the stock price a better base, from a fundamental point of view.

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