Cash Per Share
Categories: Metrics, Company Valuation
Cash per share generally refers to the cash on the balance sheet divided by the number of shares outstanding.
“Cash” in this context means short-term investments that can be easily turned into cash, rather than long-term investments that are not easily accessible or not mature yet. That is...cash is the stash of 60,000 $100 bills in the couch of the company's CEO; it's the 14,000 shares of AMZN the company got for winning a patent violation suit against Amazon; it's their Wells Fargo savings account with $11 million in it.
Consider a recent toy trend...Fingerlings. They’re little stuffed creatures that have bendy arms and hug your finger. They don’t laugh or anything like Tickle Me Elmo, but whatever...they were huge last Christmas. That trend might have been hard to predict, so the company producing them might have wanted to make sure they had lots of cash on hand before they put money into a risky new product. By making sure they have mostly liquid and cash resources, they bolster their ability to pay their expenses, as well as their investors, should the new product flop.
Happily enough in our story, the Fingerlings did not flop, and households throughout America likely have them scattered throughout the house to this day.
The more contextually relevant parlance of Cash Per Share applies to investors trying to figure out what the $47 a share is actually buying them when the company has only 50 cents a share in earnings. That is, the company is being valued at 94 times earnings on that basis...but upon 30 seconds' scrutiny, an investor would realize that the company has $34 a share in cash and no debt, so at 50 cents a share in earnings, if the cash was subtracted from the share price, the stock is valued at 26 times earnings. 26 x 50 cents is 13 bucks...i.e. where the equity value is being valued at the moment.
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Finance: What is Earnings Per Share (EPS...33 Views
finance a la shmoop what is earnings per share or EPS? okay you know the lemonade
stand the one with 20 grand in sales and 16 grand in gross profits and yeah will [Balance sheet for Lemonade Stands R Us appears]
spare you the gross jokes you know the customer asks lemonade.. what the fly
was doing in his lemonade and yes of course she said the backstroke what else
would you expect from the people at Schmo really?
so after gross profits there were operating expenses like those and then
operating profits down here that 7,500 thing then there were taxes and yeah
there are always taxes we can grumble about and then finally net income aka [Net income appears on balance sheet]
earnings but then below earnings you'll see that there are a hundred shares in
this little company the founder owns 60 of them mom owns 10 the new stepdad owns
20 he was guilted into it by you know the divorce lawyer and Enrique the
gardener for some reason who has cleverly weaseled his way into the
families arts and minds owns the last 10 its annual report time and the investors
want to know what their earnings per share were so that they can all compare
relative performance on their investments right so the total earnings
of the company in this example was five thousand two hundred fifty bucks which
means that the earnings per share of our little lemonade stand company here or
that 5,250 figure divided by a hundred or 52.50 a share that's [EPS formula appears]
what each share earned if you divvy the company into a hundred little pie slices
or parts so yeah earnings per share equals earnings per slice o pie or wait
lemonade pie has that been done yet time for a new business venture what do you [A plate of lemonade pie appears]
think we're taking investors just call us please