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Global Sources LTD and Heidrick & Struggles International: Negative Enterprise Value Screen for Net Nets:

I was reading a post by Magic Diligence on Why and How to Use Enterprise Value in Evaluating Stocks and realized I could find companies trading at less than cash per share quite quickly. By searching for companies with negative enterprise values, the screen would also ensure that the companies have manageable debt as well as the business being non capital intensive e.g. airlines and oil industry. Add in a couple of extra criterias such as an enterprise value/revenue < than 1 and a ROE of > 0 to try and filter out unduly cheap companies.

You can run the screen yourself at Yahoo.

Screen & Results

The screen criterias are:



Enterprise value <= 25m

Enterprise value/Revenue <= 1

ROE >= 0



From the results, there were two that stood out.

Global Sources LTD (GSOL)

Global Sources Ltd. is a business-to-business (B2B) media company that provides information and integrated marketing services, with a particular focus on the Chinese market. Buyers rely on the Company’s media to stay up to date with available purchasing opportunities. Suppliers use its media to find new buyers and markets for their products. Suppliers using the Company’s four primary channels: online marketplaces, print magazines, trade shows and direct online sales, are supported by its advertising creative services, education programs and online content management applications.



Current Price: $3.67

Cash per share: approx $3.55 (according to Yahoo)


Other Quick Points:

FCF positive

Recently completed a tender process at $8 per share

Impressive margins and performance metrics



Heidrick & Struggles International (HSII)

Heidrick & Struggles International, Inc. (Heidrick & Struggles) is a provider of executive search and leadership consulting services. The Company helps its clients build leadership teams by facilitating the recruitment, management and deployment of senior executives for their executive management and board positions. In addition to executive search, Heidrick & Struggles provides a range of leadership consulting services to clients.



Current Price: $14.33

Cash per share: $14.03


Other Quick Points:

FCF positive for past 3 years

Fair value somewhere around $20-$30



Other Results

These companies are not trading at negative enterprise values but are very close.



Tandy Leather (TLF)

Horsehead Holding (ZINC) - One of Pabrai’s holdings

Tuesday Morning (TUES)

Build a Bear Workshop (BBW)

DivX Inc (DIVX)



Disclosure

No holdings at time of writing


Jae Jun

Old School Value


About the author:

Jae Jun
Miguel Barbosa is founder of the multidiscplinary blog SimoleonSense.com. SimoleonSense examines value investing through a lens of behavioral finance, complex systems, psychology, philosophy, and neuroeconomics. Miguel's heros are his parents, Charlie Munger, Charlie Rose, Warren Buffett. Miguel Barbosa holds a Masters of Science in Management and a Masters of Arts in International Business. Miguel received his Bachelors of Liberal Arts and Sciences (with a concentration in Cognitive Psychology) from the University of Florida. Currently, he is working on obtaining his CFA designation (passed the first level in 2009)

Visit Jae Jun's Website


Rating: 3.8/5 (12 votes)

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