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colablackandwhite

47 Posts.

28/10/15

21:45

Post #: 16277234
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Originally posted by JS76115 ↑

I told my son, if he would like to invest in a company, do not rely on the reported net income shown in the company's Income Statement. Better check what is the real hard cash generated by the company each and every year from the operation. Cash can not be manipulated, reported net income (all accounting stuffs) surely can (Remember Enron?). If the company's net income is higher than the cash generated from operation (shown in the company's Cash Flow Statement) you have to be cautious. There's a huge possibility that someone is cooking the numbers.

Another advise I'm telling him is this : If you need more than 10 minutes to explain how appealing the idea to invest in the company, the chance is huge that it is not a good investment idea.

I check CLH's numbers via Morningstar for the last 3 years (In AUD M)

6/15 6/14 6/13

Revenue 126 107 136
Net Income 22 19 16
CFO*) 78 66 62
Equity 171 156 123

*) Cash From Operation

After taking into account some expenditures to sustain the business operation how much cash is available (FCF/Free Cash Flow) ?

Again, from Morningstar

Cash From Operation 78 66 62
Capital Expenditure -4 -4 -4
Free Cash Flow 74 62 58

At current market price, the company's market cap is AUD 250 M. With cash balance of AUD 64 M and long-term debt AUD 119 M, the company's EV/Enterprise Value is AUD 305 M. Reading the numbers has convinced me to be a buyer of this company in less than 10 minutes this morning. Thanks to the huge drop of its share price.

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Forgive me because I am a little slow with all of this.

Has CLH got $64mm in cash on its balance sheet?

CLH Price at posting: $1.87 Sentiment: None Disclosure: Not Held
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