“Does anyone know how cash is accounted for in SOTP valuations?”
The SOTP method sums the estimated value of each individual business segment to generate a company’s theoretical Total Enterprise Value (TEV). The calculation ignores the value of net cash held, and of any other tangible or non-tangible assets. These would be taken into account in an estimation of Net Present Value (NPV).
Barrenjoey’s target price of $29.30/sh for NEU obviously is based solely on its SOTP assignment of ca $10/sh value to the trofinetide and ca $19/sh to the NNZ-2591 business segments, respectively.
With an estimated net cash holding of ca $410 million this quarter (discussed on other threads), and 128 million shares on issue, cash held would represent additional value of $3.20/sh. This implies a NPV for NEU of $32.50 (Cash + TEV).
The distinction between a current value and a (future) target price can be a source of confusion. Future cash expenditure is usually treated as an unknown.
T7
NEU Price at posting:
$12.28 Sentiment: Buy Disclosure: Held
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