Sometime between now and Wednesday of next week, we have good reason to believe that Enterprise Group (TSX: E) is very likely to announce a renewal of its bank facility with PNC Bank Canada into a major new long-term lending agreement. If we are right, E's current liabilities will be reduced by 87.8%! This will cause E's current ratio (current assets/current liabilities) to immediately rise from its current record low level of 0.51 to an extremely healthy and strong level of above 4.
TSX listed non-financial companies with a current ratio of between 0.30 and 0.60 are currently trading with a median price/tangible book value ratio of 0.6718.
TSX listed non-financial companies with a current ratio of between 3 and 6 are currently trading with a median price/tangible book value ratio of 1.524.
E after making a healthy dip yesterday to fill in its Tuesday morning gap up, is currently trading for an artificially low/dirt-cheap $0.20 per share with a market cap of only $9.96 million when it has tangible equity of $38.761 million or $0.778 per share!
E's price/tangible book value ratio at $0.20 is only 0.257. Even in a worst case scenario during the 2008/2009 financial crisis, E's price/tangible book value ratio never fell below 0.317 despite E's 2009 gross profit margin declining to a record low of 7.71% and the company reporting a 2009 EBITDA loss of $15.84 million. Today, E's trailing twelve month gross profit margin is very strong at 27.11% and the company is earning large EBITDA profits!
Two days ago when E briefly hit a new 52-week high of $0.34 per share for a gain of 112.5% from NIA's Friday suggestion price of $0.16 per share, E was still only trading with a price/tangible book value ratio of 0.437. Based on TSX listed non-financial companies with a current ratio of between 0.30 and 0.60 currently trading with a median price/tangible book value ratio of 0.6718, E should already be trading today for at least $0.52 per share. If NIA is right and E's current ratio rises to an extremely healthy and strong level of above 4 sometime between now and Wednesday of next week, E's price/tangible book value ratio could potentially soon rise to 1.524 thereby valuing the stock at $1.19 per share.
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. This message is meant for informational and educational purposes only and does not provide investment advice.
Preparing Americans for Hyperinflation
