Forum Archive Index - July 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Shaun,

>
>
> Can anyone recommend a book that covers assesing companies in
> trouble, how to assess their ability/likelihood of trading out of
> financial difficulty? Or websites etc.. Or advice..
> 
>

Well, you could start with this website ;-).

If it were me, I would be looking at trying to estimate revenues 
at the high point of the business cycle.  Superimpose these revenues 
on the existing cost structure, calculate a theoretical profit 
(and using a suitable P/E ratio, a share price) and you might have a 
good idea of the recovery potential.  If you have a profit then you 
can work out a share price based on a conservatively low P/E of say 6 
to 8.

The other factor you need to put into the equation is the existing 
company debt, and need for future capital expenditure.

If the company has never made a profit, then any such hypothesising 
is truly theoretical.  If that is the case, then all bets are off.

SNOOPY


  
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