In the last report, CDA were carrying $42M of capitalised R&D on new products - this has increased from 23M three years ago. All of this has to be amortised or written off at some future time - it is 24 cps.
Capitalising development costs of new products and amortising it once you start selling the products is a valid accounting treatment - but it is sometimes used to massage profits. I am not inferring this is the case with CDA and there is no evidence pointing this way, but I am always cautious when I see capitalised expenses accumulate quickly in the balance sheet. Most auditors do not have the technical skills to assess whether expenses really were spent on new product development - but if forecast sales of a new product does not eventuate as planned, they will call for impairment of the capitalised costs.
In the last two years, capitalised expenses were $8M each year (that is, new capitalised less amortised). If the company followed a policy of expensing R&D instead of capitalising, then EBIT would have been 8M less in both years. Eventually a steady state should be reached where new capitalised costs balance the amount amortised - a continually increasing capitalised value indicates that the company is rapidly expanding or replacing it's product range. But this can't last for long - if a product's lifecycle is short, then the amortisation period should be correspondingly short.
I have been a past investor of CDA and have done well from this stock - but I am staying out at the moment until I see more clarity on this issue.
- Forums
- ASX - By Stock
- Be aware of capitalised R&D
In the last report, CDA were carrying $42M of capitalised R&D on...
-
- There are more pages in this discussion • 2 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add CDA (ASX) to my watchlist
(20min delay)
|
|||||
Last
$12.03 |
Change
0.200(1.69%) |
Mkt cap ! $2.181B |
Open | High | Low | Value | Volume |
$11.87 | $12.07 | $11.76 | $2.973M | 248.6K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 303 | $11.96 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$12.05 | 1829 | 2 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 303 | 11.960 |
1 | 1965 | 11.930 |
1 | 83 | 11.870 |
1 | 44 | 11.500 |
1 | 500 | 11.220 |
Price($) | Vol. | No. |
---|---|---|
12.050 | 1829 | 2 |
12.080 | 3000 | 1 |
12.090 | 1000 | 1 |
12.100 | 1842 | 1 |
12.160 | 2000 | 1 |
Last trade - 16.10pm 28/06/2024 (20 minute delay) ? |
Featured News
CDA (ASX) Chart |
The Watchlist
LU7
LITHIUM UNIVERSE LIMITED
Alex Hanly, CEO
Alex Hanly
CEO
SPONSORED BY The Market Online