Tangible Book Value Per Share

In reviewing HNNA's balance sheet for 2019, I used the Other Intangibles of 80.6M in calculating the Tangible Book Value Per Share resulting in a negative TBVPS. If I used the Goodwill line item instead, then the TBVPS becomes positive.

I assume that since the stock is rated as Enterprising, the TBVPS is positive and that the Goodwill line item was used.

My question -- should the Other Intangibles been used instead?

Numbers from the balance sheet:
Shareholder Equity: 75.5M
Goodwill: 0M
Other Intangible Assets: 80.6
Total Shares: 7.92M
TBVPS = (SE - Intang. A)/Total Shares

I also did the calculation as:
Total Assets: 110.2M
Total Liabilities: 34.7M
TBVPS = (TA - Intang.A - TL)/Total Shares

Secondary question -- which is the more appropriate calculation of TBVPS?

Thanks,

Christian

Stocks Discussed: 

Submitted by chaeuber. Created on Monday 10th February 2020. Updated on Monday 10th February 2020.

Submitted by GrahamValue on Monday 10th February 2020

Thank you for your forum post, chaeuber!

Book Value Per Share (BVPS) calculations these days do usually include Goodwill and Intangibles. Tangible Book Value Per Share (TBVPS) calculations very specifically restrict themselves to Tangible Assets.

So the calculation would be something like:

TBVPS = (Total Assets - Intangibles - Goodwill) รท Shares Outstanding

Graham used Book Values only for Defensive quality stocks. He used Tangible Assets for evaluating Enterprising and NCAV quality stocks. He also wrote quite extensively about the financial and mathematical aspects of using Intangibles in stock valuations.

"A generation or more ago it was the standard rule, recognized both in average stock prices and in formal or legal valuations, that intangibles were to be appraised on a more conservative basis than tangibles"

"But what has happened since the 1920s? Essentially the exact reverse of these relationships may now be seen."

The Intelligent Investor - Appendix 4: The New Speculation in Common Stocks

Submitted by chaeuber on Monday 10th February 2020

Thanks for the clarification. I missed that subtlety that had TBVPS using Net Total Assets.

Is there any value in looking at a metric that considers Book Value after accounting for Intangible Assets, i.e. (Total Assets - Intangible Assets - Total Liabilities)/Shares Outstanding?

In the case of HNNA, this value is negative because its total assets are lower than the sum of its Intangible Assets and Total Liabilities.

The website has been very educational -- thank you!

Submitted by GrahamValue on Monday 10th February 2020

Thank you for your kind words, chaeuber!

Please note that Serenity receives its TBVPS values from its data vendor, and does not calculate them independently.

Also, Hennessy Advisors Inc (NAS:HNNA) being in the Financial Services sector would need to be appraised using the Total Assets and Equity:Debt sub-framework where TBVPS values are not used.