RE:RE:STB's value is largely off booksgoldsternp wrote: Do you mean the fully depreciated buses that are still running ?
What I mean is that when they have a contract that runs on leased buses, they generate cashfow.
Let's say the contract is for 10 years with a 90% chance of extending it to 20 years. Including the lease and all costs, the contract will generate earnings of $10M for the first 10 years and then $20M for the next 10 years. In total, over 20 years, the contracts are likely (90%) to generate $30M.
You want to differ taxes as much as you can, so you tilt the charges to be higher during the early years and lower during the later years. When the revenue on this contract are about to generate taxes, you try to win additionnal contracts which will once again differ taxes.
Obviously, this tactic will lead to lower book value per share as you won't generate net income as you try and differ taxes as much as you can.
For the investor though, knowing you'll get $30 millions over 20 years, or $1,5 millions per year of cash back, it matters little what book value is. You still get your share of the $1,5 millions. The value of the stock is based on annual cash flow of $1,5 milions no matter what book value is, because that's the value of the contract, which will only "show" on the books once you've stopped growing and you can't push back taxes anymore.
Which means in STB's case, what's important is that the cash flow support the dividends. Imo, I think they should aim closer to 50% dividend and use the remaining cash to grow the business (and differ taxes). However, book value is not relevant to what the share price should be if you understand how they do the business.