Here’s a breakdown of the four best-ranked stocks on the Net-Net Working Capital (NNWC) screen.
NNWC is similar to the NCAV screen except it is more stringent. Graham knew that companies undergoing liquidation would not necessarily sell all current assets at book value.
In order to add a level of safety, he felt it beneficial to discount the accounts receivables and inventories when calculating current assets.
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Like NCAV, NNWC finds stocks trading for less than the difference between current assets minus total liabilities, and no regard is given to the company’s long-term assets or future profits.
But where NCAV accounts for 100% of a company’s current assets, NNWC builds a larger margin of safety by discounting both receivables and inventory.
To calculate the liquidation value of a stock using NNWC, the stock screen values a firm’s current assets at the following levels:
– Cash & Cash Equivalents: 100%
– Accounts Receivables: 75%
– Inventories: 50%
– Long-Term Assets: 0%
Click here to learn more about the NNWC stock screen.
Top Ranked NNWC Stocks
Here is a breakdown of five stocks with the lowest price to NNWC:
China Green Agriculture, Inc (NYSE:CGA): Engages in the research, development, production, distribution, and sale of various types of fertilizers and agricultural products.
– Cash & Cash Equivalents (100%): $108 Million
– Accounts Receivables (75%): $111 Million
– Inventories (50%): $39.5 Million
– Total Liabilities: $36 Million
– Total Shares: 38 Million
– NNWC: $5.92
– Current Price: $1.21 (closing price on 12/29/16)
– Price/NNWC: 20%
Emerson Radio Corp (NYSEMKT:MSN): Designs, sources, imports, markets, and sells various houseware and consumer electronic products in the United States and internationally.
– Cash & Cash Equivalents (100%): $52 Million
– Accounts Receivables (75%): $850 Thousand
– Inventories (50%): $2 Million
– Total Liabilities: $3 Million
– Total Shares: 27 Million
– NNWC: $1.93
– Current Price: $1.01 (closing price on 12/29/16)
– Price/NNWC: 52%