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Primus Guaranty Ltd  (OTCPK:PRSG) Net-Net Working Capital: \$-18.37 Mil (As of Dec. 2011)

In calculating the Net-Net Working Capital (NNWC), Benjamin Graham assumed that a company's accounts receivable is only worth 75% its value, its inventory is only worth 50% of its value, but its liabilities have to be paid in full. In addition, Graham believed that preferred stock belongs on the liability side of the balance sheet, not as part of capital and surplus. This is a conservative way of estimating the company's value.

Primus Guaranty Ltd's net-net working capital per share for the quarter that ended in Dec. 2011 was \$-18.37.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Primus Guaranty Ltd Annual Data

 Dec02 Dec03 Dec04 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Net-Net Working Capital -16.29 -51.10 -20.15 -14.28 -18.37

Primus Guaranty Ltd Quarterly Data

 Mar07 Jun07 Sep07 Dec07 Mar08 Jun08 Sep08 Dec08 Mar09 Jun09 Sep09 Dec09 Mar10 Jun10 Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 Net-Net Working Capital -14.28 -14.63 -11.79 -11.25 -18.37

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.

Calculation

Primus Guaranty Ltd's Net-Net Working Capital (NNWC) per share for the fiscal year that ended in Dec. 2011 is calculated as

 Net-Net Working Capital Per Share (A: Dec. 2011 ) = (Cash And Cash Equivalents + 0.75 * Accounts Receivable + 0.5 * Total Inventories - Total Liabilities - Preferred Stock / Shares Outstanding (Diluted Average) = (87.247 + 0.75 * 5.725 + 0.5 * 0 - 731.462 - 0) / 34.84 = -18.37

Primus Guaranty Ltd's Net-Net Working Capital (NNWC) per share for the quarter that ended in Dec. 2011 is calculated as

 Net-Net Working Capital Per Share (Q: Dec. 2011 ) = (Cash And Cash Equivalents + 0.75 * Accounts Receivable + 0.5 * Total Inventories - Total Liabilities - Preferred Stock / Shares Outstanding (Diluted Average) = (87.247 + 0.75 * 5.725 + 0.5 * 0 - 731.462 - 0) / 34.84 = -18.37

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

In calculating the Net-Net Working Capital (NNWC), Benjamin Graham assumed that a company's accounts receivable is only worth 75% its value, its inventory is only worth 50% of its value, but its liabilities have to be paid in full.

In addition, Graham believed that preferred stock belongs on the liability side of the balance sheet, not as part of capital and surplus. In "Security Analysis", preferred stock is dubbed "an imperfect creditorship position" that is best placed on the balance sheet alongside funded debt.

This is a conservative way of estimating the company's value.

Explanation

One research study, covering the years 1970 through 1983 showed that portfolios picked at the beginning of each year, and held for one year, returned 29.4 percent, on average, over the 13-year period, compared to 11.5 percent for the S&P 500 Index. Other studies of Graham's strategy produced similar results.

Benjamin Graham looked for companies whose market values were less than two-thirds of their net-net value. They are collected under our Net-Net screener. GuruFocus also publishes a monthly Net-Net newsletter.

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