Fundamental Analysis for Dummies by Matt Krantz

Author:Matt Krantz [Krantz, Matt]
Language: eng
Format: epub
ISBN: 9781119263609
Publisher: Wiley
Published: 2016-05-02T00:00:00+00:00

When a stock price falls below a company’s cash per share, don’t assume it’s a screaming buy. Sometimes a stock price gets beaten below cash levels due to excessive debt. In that case, the cash doesn’t really belong to the company, but to the lenders. A stock price might also fall below a company’s cash if investors are fearful the management team will waste the cash in various ways, including foolishly buying other companies. That’s why the price-to-book ratio is so helpful, because it considers the role of debt. A stock with a low stock price to debt might also indicate investors have no confidence in the management team.

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