An EU Cash-Machine For 3.6x FCF
The business also has a fortress balance sheet full of liquid assets and cash.
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Today’s business has a fortress balance sheet and powerful earnings over recent years.
As ever, I like to use earnings that represent the cash I could extract if I owned the business whole.
For today’s business that’s the FCF figure with a few adjustments.
There isn’t much protection from assets here, because the TBV is slightly lower than today’s market cap.
The NCAV ratio is similar (most assets are current), but the fact it’s positive is usually a sign of a very healthy, low risk set-up.
The entire basis for this set up comes from its earnings power.
The balance sheet just gives us space for the re-rating to occur without time-pressures.
Crucially, this business has a large free-float which makes an activist position feasible and eliminates an involuntary delisting at absurd prices.
Right now, the market has priced this business as a melting ice cube with profits that are about to wither away into nothing.
The reality is that the business is facing a couple of issues, but they are far from existential and recent performance indicates the business will be just fine.
Let’s take a look…