The cash conversion SGH Australian NPAT is poor. There's many views on reasons this which essentially boil down to accounting profits consistently overstated relative cash flow because treatment WIP and acquisitions. As an example:
"Our primary issue with SGH is the company simply does not produce enough cash flow to support its earnings."
Mr Brooker said in the company's eight years as a listed company it had generated $187 million of cash flow against $349 million of earnings. That equates to a cash conversion rate of only 54 per cent. In its best year it converted 76 per cent of its earnings and its worst just 3 per cent, Mr Brooker said.
Some analysts/followers have even harsher views on SGH cash conversion.
The other issue is "assuming Quindell makes no profits ever". It's also possible that Quindell continues to consume cash, so "no profits ever" is not the baseline.
SGH Price at posting:
83.0¢ Sentiment: Sell Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)