A Newbie Guide to Investing

[specuvestor]

Great points in this discussion on EV

What I've learnt is that unless you can takeover a company, do be careful when valuing based on EV, which was developed primarily as a back of envelope gauge in the days of M&A craze of the 80s. EV is just an additional indicator to the OPMI what is worth to another takeover party (if there is one).

Cif5000 is right that there will always be a discount factor on cash because unless u control the company, you have no access to it. That's why shell companies are required to submit a business proposal else be delisted as the owners could simply pay themselves big remunerations and bleed shareholders to death (hint to deep value investors). After a sale, it is a matter of capital structure to determine the value it will add but in general usually in the short term 1+1>2. In the long run however the strategic consideration of why the 1+1 came together in the first place is more important. That separates investors from business owners