What is goodwill?

The stuff that makes a company worth more than the sum of its parts
I wrote yesterday (and not very clearly, reading again) about how the problem with an asset-based valuation of a company is goodwill. Accurate valuation of the tangible assets can be tricky, but it’s possible. It’s the difference between the book value and […]

Why worry about goodwill?

The mysterious stuff that underlies most of the stockmarket’s value
OK, so the accounting definition is simple enough: goodwill is the difference between the acquisition price for a company (or its market value) and the value of its assets.
But the question that often bothers me is what this weird, intangible stuff called goodwill actually is? How […]

Weird financial alchemy at Rightmove (RMV)

How to create £500m out of thin air
I posted a little while back on Rightmove, the property website, which I consider to be overvalued.
On Tuesday they announced details of a financial restructuring which will mean a company with £33.2m in total assets suddenly has £500m in distributable reserves.
Here are the main points:
“The Proposals seek to […]

Premier Profits (PAGZ.L)

On offer: a 2 per cent return by November 8th

One area that has been lucrative for me over the last couple of years is the wreckage of the UK’s split capital investment trusts. For those unfamiliar with the story, these are collective investment funds with a bizarre and complex capital structure, which went to hell […]

Dodgy data

Why you should never trust financial data on the internet
I was going to write today about another company that I like: Haynes, the family-owned publisher of car maintenance manuals.
In preparation I started calculating the price-to-earnings, the yield, and the ratio I care about most, price-to-book.
To calculate price-to-book you need to know the market capitalisation. Look […]

Valuing Northern Rock II (NRK.L)

Are there two north-east building societies with liquidity problems?
Northern Rock Scenario Analyser

It is almost the only answer that makes sense. Northern Rock’s equity (NRK - 179.2p) and its subordinated debt (NRKP - 71.5p offer) are pricing in such different assumptions that it is hard to believe both are issued by the same company.
The equity investors […]