Price charts don’t tell the whole story
September 17, 2013 3 Comments
Towards the end of calendar year 2007, the stock price of Australian rail & port operator, Asciano (AIO) was trading at $18 per share giving it a market cap of A$4.9 billion and it’s Enterprise Value (market cap plus debt and minus its cash) was A$8.97 billion. They were also near reporting a financial year EBITDA of A$626 million.
Today, the stock price is $5.80 and its market capitalisation is A$5.65 billion and the Enterprise Value is A$8.75 billion. Both figures are near or higher than the values seen at the end of 2007.
So, we take the 975 million shares and multiply it by $5.80 per share to equal $5.65 billion of Market Capitalisation.
Back in 2007, AIO has 273 million shares on issue which when multiplied by its $18 share price gave it a market cap of A$4.9 billion.
The difference being, Asciano has quadrupled the amount of shares on issue over the past 5 years.
rob zdravevski's blog 
Interesting summary rob
Sent from my iPhone
There’s a real misnomer amongst investors that if the stock price was once $10 and now it’s $2, then it must be automatically cheaper. Since we’ve had a few years of major share issuance and corporate re-capitalisations, this needs closer attention when making investment decisions along with accounting for “reverse” stock splits.
Such an example is U.S. listed Citigroup. It had a 1 for 10 reverse split in May 2011, thus beefing up its stock price 10 fold from $3.50 to $35.
Now the stock is trading at $51 with a market cap of $155 billion and its ‘split-adjusted” high in 2006 is $570 which gave it a market cap of $240 billion.
Great commentary. Spot on Rob