Think Value

The table outlines the breakdown of the organization’s value into various components. This is the same as the economic balance. To determine the fair price per share, we need to add surplus assets to the core business value, subtract non-operational liabilities, and divide the result by the number of shares.

It is not easy to first distinguish and then separately evaluate these additional components, sometimes as labor-intensive as calculating the core business. The structure of the components is usually as follows:

1. Surplus assets:
   • Cash and short-term investments – any amount exceeding 2% of revenues;
   • Investments in unconsolidated organizations – if the share is less than 50%, full consolidation of accounts does not occur;
   • Investments in publicly traded subsidiaries – this assessment is relatively easy as we can use market prices;
   • Investments in private companies – in some cases, individual valuations are required for each unit;
   • Loans granted to other companies;
   • Financial subsidiaries – customer credit centers;
   • Discontinued operations – residual idle assets;
   • Surplus real estate – non-operational properties;
   • Tax loss carryforwards from historical losses.
2. Interest-bearing loans:
   • The valuation of investment-grade loans is relatively easy as they are traded and market prices are known;
   • Non-investment-grade loans – in some cases, when leverage is high and credit ratings are low, separate assessment might be necessary.
3. Loan equivalents:
   • Provisions – there are four types: short-term operational (not included in loan equivalents); long-term, non-operational, and profit-balancing;
   • Leases – financial and capitalized operational;
   • Unfunded pension liabilities;
   • Contingent liabilities – typically off-balance sheet and should be found in the notes;
4. Hybrid claims:
   • Convertible securities;
   • Employee stock options;
   • Non-controlling interests.