How to value a loss making company header

How to Value a Loss Making Company

There are plenty of companies listed on global stock exchanges that don’t make any money for their investors. Yet despite this, when there is excitement around the company, there is never a shortage of people still willing to invest. Snap Inc. (NYSE:SNAP) – owner of Snapchat – is a high profile social media company in the United States whose losses have grown year on year since their founding.

share price falls

A company’s share price falls >20%, should you buy or sell?


Throughout the life of a listed company, it will undoubtedly encounter share price swings due to the unpredictable nature of industry and market sentiment. In fact, there are a whole host of reasons why a company may experience a share price fall and when it does, this can be a great time to consider it for your portfolio. But a share price fall does not mean you should automatically buy, and it certainly doesn’t mean you should automatically sell. The reason for the share price fall will ultimately determine what action to take.

Why high intangibles can be detrimental to a company

Why High Intangibles Can Be Detrimental to Any Listed Business


Acquisition stories seem to be a dime a dozen these days. The idea is that a company in a fragmented industry buys smaller players or competitors to increase their own size and scale. There are a few reasons why a company may do this. The most common reasons are: to expand their market presence, to increase their capabilities, or acquire strategic assets that would take years of capital expenditure to build.


4 Things you should know before investing in small cap stocks

Small caps stocks – companies with a small market capitalisation – can present tremendous opportunities to the savvy investor who can determine a fast grower at a reasonable price. But with this comes a particular set of risks that should be taken into account by all who invest in them. Here are 4 things to consider before investing in small cap stocks.

(The definition of a small market cap will vary between investors, but I’ll assume it refers to a company worth less than $100m in market capitalisation. Conversely, I’ll assume a large market cap refers to a company worth more than $1b.)


Why the Price to Earnings Ratio can be Misleading for Investors

The Price to Earnings Ratio (P/E) is one of the “go to” metrics for most investors, brokers, and funds when in the very early stages of vetting an investment idea. It gives an indication of how much the market is willing to pay for a stock in terms of its earnings. It essentially tells you “How many years will it take for me to get my investment back from earnings?”


Finding Turnaround Stories in the Search for Value

Here at Farnam we are always on the lookout for companies that represent value from a fundamental perspective. While companies like this can come in many forms, often the best place to start looking is with the classic “turnaround” story.

We’re all familiar with the idea; a company that has been beaten down by the market makes a strategic decision to implement change and attempt to find new avenues for growth. It often comes in the form of divesting non-core assets or making an acquisition of another business.


Ignoring the Fluctuations of the Market

In February, I had the idea to write about the market being in “bear” territory as the ASX 200 Accumulation Index had dropped 20% (to 4800 points) since its recent peak (very nearly 6000 points in April 2015). Even though it is an arbitrary number, this is generally considered a bear market. I even had this incredibly witty title “Bear Season Opens” and had planned to write about what previous bear markets looked like and how long they lasted.