A Trio of Net Net Working Capital Stocks
- By Alberto Abaterusso
There are some investors who buy stocks that are trading below their liquidation value because they believe they can make remarkable gains out of their investments after the market has reassessed the share prices to near or above the liquidation value. Should the company go bankrupt, these shareholders would in theory still be able to earn a profit due to a difference between the liquidation value and the price paid at the acquisition of the stock.
The liquidation value of these so-called net-net working capital stocks is calculated as "cash and short-term investments plus 75% of accounts receivable plus 50% of inventory, minus total liabilities."
Thus, short-term investors may be interested in the below companies, as their stocks are trading below their net-net working capital.
KBS Fashion Group Ltd
The first stock short-term investors may be interested in is KBS Fashion Group Ltd (NASDAQ:KBSF), a Chinese designer and seller of casual and fashion menswear products in the People's Republic of China.
The stock was trading at a price of $2.59 per share at close on Monday, standing far below the net-net working capital of $7.08.
GuruFocus assigned a score of 6 out of 10 to the company's financial strength and of 3 out of 10 to its profitability.
Following a 10.9% increase which occurred over the past year, the stock has a market capitalization of $6.71 million and a 52-week range of $0.95 to $4.45.
Jim Simons is the leader amid the company's top fund holders with 2.52% of shares outstanding. The investor is followed by HRT FINANCIAL LLC with 1.31% and UBS Group AG with 0.05%.
Nova Lifestyle Inc
The second stock short-term investors may be interested in is Nova Lifestyle Inc (NASDAQ:NVFY), a Commerce, California-based designer, manufacturer and seller of furniture for middle and upper middle-income households and businesses worldwide.
The stock was trading at a price of $2.15 per share at close on Monday, which is significantly below the net-net working capital of $5.04.
GuruFocus assigned a score of 6 out of 10 to the company's financial strength and of 5 out of 10 to its profitability.
As a result of an 8.88% fall which happened in the past year, the stock has a market capitalization of $11.78 million and a 52-week range of $0.66 to $3.08.
Catabasis Pharmaceuticals Inc
The third stock to consider is Catabasis Pharmaceuticals Inc (NASDAQ:CATB), a Boston, Massachusetts-based clinical-stage biopharmaceutical developer of treatments for various clinical conditions such as Duchenne muscular dystrophy and cystic fibrosis.
The stock was trading at a price of $1.65 per share at close on Monday, which is nearly 30% below the net-net working capital of $2.33.
The company holds a GuruFocus financial strength rating of 5 out of 10. Regarding its profitability, the stock has a negative return on equity of -76.65% (versus the industry median of -46.62%), while the three-year Ebitda growth rate and three-year EPS without NRI growth rates are 52.2% and 52.7%, respectively.
Following a nearly 74% decrease that happened in the share price over the past year, the market capitalization now stands at $33.14 million and the 52-week range is $1.25 to $8.59.
FEDERATED INVESTORS INC /PA/ is the leader amid the company's top fund holders with 8.19% of shares outstanding, followed by BlackRock Inc. with 5.81% and VANGUARD GROUP INC with 3.90%.
On Wall Street, the stock has a recommendation rating of hold with an average target price of $24.
Disclosure: I have no positions in any securities mentioned.
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This article first appeared on GuruFocus.
