When NIA first suggested Enterprise Group (TSX: E) on September 18th at $0.16 per share as its #1 favorite overall stock suggestion for the remainder of 2020, E had a current ratio of only 0.51, which was very bad. It meant that E had $9.759 million in current liabilities and only $4.975 million in current assets for a working capital deficit of ($4.785 million).
In recent months, E has achieved an incredible balance sheet turnaround and it has done so without any dilution. E's current liabilities have been reduced by 80.25% to $1.927 million. E's current assets have improved by 32.18% to $6.576 million. E has gone from a working capital deficit of ($4.785 million) to today having positive working capital of $4.649 million! This equals a quarter-over-quarter working capital improvement of $9.434 million!
Back on September 30, 2011, E had a working capital deficit of ($1.147 million) and E was trading for $0.345 per share. On June 30, 2013, E had positive working capital of $8.554 million and E was trading for $1.98 per share. During this time period, as E swung from negative to positive working capital with a total working capital improvement of $9.701 million, E's share price gained by 473.913%!
Back then, it took seven quarters for E's working capital to improve by $9.701 million. E's working capital has just improved by $9.434 million in a single quarter!
E has gone from a record low current ratio of 0.51 to a new two-year high current ratio of 3.413. E has a tangible book value of $0.747 per share, meaning that E has actual real tangible assets minus all liabilities that value E at $0.747 per share (there is almost no goodwill/intangibles on E's balance sheet). With a current ratio of 0.51 you can justify a stock trading at a large discount below tangible book value, but you can't justify the same thing when a stock has a current ratio of 3.413 meaning current assets are 3.413X larger than current liabilities!
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.