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 (NASDAQ:BNTC), 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 (NASDAQ:EVGN), 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 (NYSE:QD), 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.
This article first appeared on GuruFocus.
