RE:RE:RE:RE:RE:Remains Dirt Cheap Here is another way to think about it.
Ask yourself, how much money from their cash pile is not required to operate the business? Suppose you conclude that $50m is not required to operate the business and the rest is required for working capital purposes. Remove this excess cash from the market cap and compute a reasonable fcf multiple on the business. For instance, suppose you conclude that 7 is a reasonable fcf multiple and that $50m can be extracted from the balance sheet. Then the company would be valued at,
$20m*7 + $50m= $190m
At about 49 m shares, we could say the company
may be worth around $3.87 a share. Again, all of this is purely hypothetical and arbitrary in the numbers chosen above.
I personally prefer to use free cash flow yield without subtracting the cash from the business. This gives me a more conservative view of what I can expect to earn in the future from these cash flows. If the company invests its cash wisely then I can expect an increase in my fcf which should correlate with higher returns in the future.