Thanks @aruc6393. That was a well written response.
My opinion is that you are conflating the annual accounting..... EPS, intangibles on balance sheet, shareholder equity.....which is after the fact reporting for a fixed period, with items that is current and actually matter in terms of the forward looking performance of the company and evaluation of value on the current share price.
"The intangibles affect the balance sheet, not the future cash flows per say. " - yes....accounting.
"The issue is that the intangibles are not being converting in to profits" <- THIS. Here you have touched on the main item worth considering.
"on the Income statement, so they are being written off as non cash impairments (affecting bottom line EPS)." - accounting.
"so in effect shareholders are losing value on their investment YoY" - accounting. .... this was already true the moment cash was paid for a non producing asset ..... the accounting just realises this on paper after the fact If they were to try and "sell" what they "bought" immediately after buying it.... that is the real value... not what you put on paper.
", because the balance sheet isn't as strong as suggested." - this is mostly down to how accurate the intangibles value is... which is only proven through their profitability... either by selling the intangible OR producing income.
"Warren Buffet always suggests ignoring intangibles on the balance sheet, especially when those intangibles struggle to deliver you the profits." - it would be incorrect to completely ignore intangibles, especially in a company where most of the value IS from intagibles, which is more and more the case these days. Brand, exclusivity etc. .. but yes.... those intangibles ONLY have value in what income they produce.... so one should be carefull and not take the figure at face value since these numbers are seldom correct.
"If you do that with MYX , you end up with little net tangible assets, much lower than current market cap." - so you are suggesting valueing MYX on a liquidation basis? As per above, lots of companies only have their real value in exactly the intangibles..... Are you suggesting then that MYX is worth A$0.06 ?
"Unless MYX can start producing heavy profits" - absolutely. But for someone buying in at 33c the profits don't have to justify previous expenditure.
" to put some retained earnings on the balance sheet, and build shareholder equity (rather than destroy it)" - accounting. sure we need to make a profit. and that profit needs to pay back the initial cash investment, but this happens over time. not in any specific12 month period. MYX is in the position that there has been some bad previous investments.... therefore the SP has already been punished. Currently if you work back the 33c to "implied" equity then you come to US$436m. ( if you can do that ... ) The question them becomes.... is paying this much going to produce profitable returns....
", I wouldn't be valuing the company much more than net tangible assets." - I don't think valuing a pharma on a liquidation basis is the way to go. It means you put NO value in the structure, brand or existing licence agreements and partnerships... and that is not correct. You can value it quite low if you want, but you cannot just ignore it. So what do you value MYX at then?
(20min delay)