There are some investors who buy stocks that are trading below their liquidation value because they believe that they can make a profit out of their investments after the market has reappraised the share prices up to a value near or above the liquidation value in the short term.
These investors calculate the liquidation value of these so-called "Benjamin Graham net-net working capital" stocks as "cash and short-term investments + 75% of receivables + 50% of inventory - total liabilities."
Here are some results of my research for stocks whose share prices are trading below their net-net working capital.
Benitec Biopharma Inc
The first stock under consideration is Benitec Biopharma Inc (BNTC, Financial), a Hayward, California-based biotech developer of innovative treatments for genetic diseases.
The stock was trading at $7.68 per American Depository Receipt at close on Wednesday, which is largely below the net-net working capital of $12.50 per ADR calculated based on figures from the most recent quarter's balance sheet.
The company holds a GuruFocus financial strength rating of 4 out of 10 and a GuruFocus profitability rating of 3 out of 10.
As a result of a 39.8% fall over the past year, the stock has a market capitalization of $2.47 billion and a 52-week range of $4.14 to $29.55.
Wall Street sell-side analysts recommend a buy rating with an average target price of $14 per ADR for the stock.
Evogene Ltd
The second stock to consider is Evogene Ltd (EVGN, Financial), an Israeli biotech developer of various products for life science markets in Israel and the U.S.
The stock was trading at $1.05 per share at close on Wednesday, which compared to a net-net working capital of $1.27 (based on figures from most recent quarter’s balance sheet), yields a discount margin of 17.3%.
The company holds a GuruFocus financial strength rating of 4 out of 10 and a GuruFocus profitability rating of 1 out of 10.
Following a 28% decline over the past year, the stock has a market capitalization of $26.4 million and a 52-week range of $0.75 to $2.46.
Wall Street sell-side analysts have recommended a hold rating with an average target price of $8 per share for the company.
The company's top fund holder is WADDELL & REED FINANCIAL INC with 10.71% of shares outstanding, followed by UBS Group AG with 5.27% and GOLDMAN SACHS GROUP INC with 2.98%.
Qudian Inc
The third stock under consideration is Qudian Inc (QD, Financial), a Chinese online provider of consumer credit products in the People's Republic of China.
The stock was trading at $1.70 per American Depository Receipt at close on Wednesday, which was approximately 36.3% below the net-net working capital of about $2.67 per ADR (based on figures from the most recent quarter’s balance sheet).
The company holds a GuruFocus financial strength rating of 7 out of 10 and a GuruFocus profitability rating of 5 out of 10.
As a result of an 81.4% fall in the past year, the market capitalization now trades at around $431.32 million and the 52-week range is $1.21 to $9.21.
As of July, the stock has three strong buy recommendation ratings, three buy recommendation ratings and one hold recommendation rating on Wall Street. The average target price is $1.59 per share.
The company's top fund holder is ACADIAN ASSET MANAGEMENT LLC with 2.65% of shares outstanding, followed by Greenwoods Asset Management Ltd with 2.16% and APG All Pensions Group NV with 1.85%.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Picks Trading Below the Graham Number
- 3 Stocks Trading at a Discount
- A Trio of Low Shiller Price-Earnings Ratio Stocks
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