Comment, question or quotation of the day

21-02-2019 : Question asked on the vernimmen.com website

What can be deduced from the fact that a firm that does not earn its cost of capital is nevertheless valued for an entreprise value greater than the amount of its operating assets?   We can then deduce two things, the most likely of which is the second:   1 / this is an overvalued company,   2 / that the market believes that in the not-too-distant future, this company will be able to earn more than its cost of capital and that, consequently, it values its operating assets for more than their book value. Then it's up to you to assess whether it seems likely the company will soon earn more than its cost of capital, otherwise you fall back into the case 1.   Have a pleasant day  

20-02-2019 : Quote of the day

“Shareholders are both stupid and presumptuous. Stupid to hand their money over to somebody else without retaining any sort of effective control over how it’s used. Presumptuous to expect a dividend in return for their stupidity.”           Anonymous  



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The Vernimmen.com Letter

Number 118 of January 2019

News : The mishaps associated with IFRS

Statistics : Asset betas

Research : Asset valuation: rehabilitating the size factor

Q&A : Is Heineken right not to buy back its shares?

COMMENTS : Comments posted on Facebook