You can see from these balance sheets taken from¸
morningstar.com that this company has:
106 millions assets(intangibles already substracted
from this price)
33 millions liabilities
which gives you 75 millions on equity, the market cap today
(29th May 2010) is at 12.54 millions,
this gives you a price to book ratio of 0.17.
Now a price to book that low could be excused if the company
was loosing a lot of money or if it
was very leveraged, but this company did neither.
On this page you can see that from 2004 the company has only lost income last year, and has come back to profit last quarter and managent expect things to go for the better.
Here is the last release of their quarter
This stocks has got a lot of diluted shares but it is not enough to show such a low price for this company and I think that low volume of trade, a micro cap and a company that is not followed by analysts could be the reason for this price.
Value investing is all about finding company that are poorly followed by analysts and finding where price and value have a large margin with a very substantial upside.
We can say that a conservative price to book for a company that produce any kind of steady net income should be at least 1, with all intangibles discounted.
If this company comes back to steady income, which is quite possible, its price should come back to a more reasonable price.
The current price is at 0.96 and if it had a price to book of 1 it would have a price of 5.64$ which would show a good profit.
That's it for my first post, look forward for a next one very soon about some other obscure company.
Comments and opinions are welcomed and I will take them into account and maybe modify my
posts from new informations I could get from them. I also have a small position into this company and all my following posts will mostly be about small micro cap companies that I have recently bought.
Simon Garceau
Accounting student at McGill university Montreal
