[ Log On ]
Negative Entreprise Value Stock Screener
Use this screener to find the rare situations where companies are worth less than their cash.
Go to screener
Since enterprise value accounts for debt and subtracts the excess cash from the equation, if the formula above results in a negative number, the conclusion is that the company is loaded with excess cash, hence a cash rich company trading for less than it’s value.
If you look at NCAV stocks in the Graham Net Net screen, you will see that many companies are loaded with inventory or receivables, but a company with negative EV will have a higher percentage of assets in cash. Hence a higher quality of assets. These companies will have more manageable debt as well as be a business that is non-capital intensive e.g. airlines and oil industry.
Theoretically, you could buy one of these companies, pay off its debt and still have more cash than you paid, thus turning a profit. Most companies have positive enterprise value because investors assume they'll be worth more in the future. But when investors lose faith in a company, its enterprise value sometimes goes negative, creating an opportunity for so-called vulture investors
Typically, these investors buy a stake in the company and might wage a proxy fight. Depending on their ambition and success, the dissident shareholders might gain control of a company and sell or liquidate it. Or they might settle for a board seat and try to force management to slash expenses, pay a cash dividend or take other steps to boost shareholder value.
- There can be some problems .These companies can be cash burning companies (fe biotechnology sector) (they can burn cash faster than a hostile take over takes places) and like about half of all listed companies they can adopt a poison pill program that would make a hostile takeover prohibitively expensive or difficult.