In addition to thoroughly reading a company's ARs, figuring out it's business etc. I have probably spent too much focus on profitability and valuation measures.
I've just re-looked at Next (NXT) and Zytronic (ZYT) (we own shares in each) and I'm still reasonably content with these two.
I'm now looking at a possible addition - Halma (HLMA). I have had a very quick skim read of the first 30 or so pages of the 2014 AR, and periodically see the word "acquire" or "adding valuable sectors to our...by acquiring".
Now although I'm often a tad cynical re. acquistions, I guess when pursued diligently, then perhaps they can/do add value.
Then the thought occured to me - What ratios, can be derived from the assets part of my analysis spreadsheet with a view to assessing to balance sheet impact of several years of acquiring?
This is how the assets data entry section on my spread sheet is currently setup:
Non current assets |
Goodwill | 0.00
Other intangibles | 0.00
Tax | 0.00
Property,equipment etc. | 0.00
Receivables | 0.00
Investments | 0.00
Joint ventures, associates | 0.00
Miscellaneous | 0.00
Pension surplus | 0.00
Total | 0.00
Current assets |
Inventories/stock | 0.00
Tax | 0.00
Work in progress/for sale | 0.00
Marketable investments | 0.00
Receivables | 0.00
Cash and equivalents | 0.00
Miscellaneous | 0.00
Total | 0.00
Total Assets | 0.00
(To the right of the sheet, a bunch of calculations are done and the sheet displays the OM, ROCE, gearing, interest coverage etc)
Regards the analysis of a company with a view to whether the acquistions over time are becoming weighty in the balance sheet, what do people think about the introduction of following ratios:
Goodwill/Total Assets
and
Intangibles/Total Assets
Clearly their values, impacts, etc. could be sector/company dependent. But any ideas about what sort of values may give rise to cause for concern? 20% ?
Anyway for now I'm going to add the above ratios to my sheet, and then see how their values change over the period 2014-2018.
All comments, other ideas, ruthless ridicule welcomed,
Matt