Your right - book value is easy to quantify in
terms of calculating a specific number. Your
calculation yields book value per share. Thanks for noting my
What is more difficult is relating that number to
"value". In an extreme case, a company could be sitting on
highly valuable real estate acquired years ago. The
"book value" of the property could be quite small;
where as the true value would be much greater. And
calculating return on equity does not really reflect the true
return on equity. Conversely, a company could be have an
impaired or obsolete asset, the impairment of which is not
reflected in book value.
Determining these factors
is very difficult for the average investor.
just read that the dump where Timken sends its
EAF dust is not stabilizing it properly & is under
investigation by the EPA because of it. is TKR paying for a
service its not getting? isn't there liability ahead for
TKR if this is true?
There are many factors that can affect book
value, both up and down. As you rightly point out, in
many industries, a fixed asset (such as building) only
have value to the company that built it. As a more
extreme example, Boeing has buildings for assembling
aircraft that would be of much lower value for any purpose
other than aircraft assembly. That, however, does not
mean that the buildings are worth only a fraction of
their cost; though in a forced liquidation they would
not sell for anywhere near their carrying
Conversely, if an asset has been fully depreciated, it will
be carried on the books at no value (or only salvage
value), even though it might have considerable
Book value also does not include franchise value,
which can be a significant asset for a company with a
good reputation (such as TKR).
For myself, part
of my screening of investment prospects focuses on
companies with strong financial positions; little debt,
good current ratio (ideally liquid assets exceeding
total liabilities), good interest payment coverage, and
fixed assets that are reasonably well protected against
diminution or impairment.
I agree, with plant shutdowns begining, and a
possible slowdown in the economy, Timkin's PE could double
on earnings drop. Secondly, Timkin is not adverse to
cutting dividends if need be.
Thirdly, Timkin is
historically a choppy stock that does not outperform for the
long-term;I have always treated it as a one-two year buy. I
did this last year, and I have done it twice before
in the last 18 years.
However, it is a good
company, and is in a traditional buy position for the
Stock...the question remains.. is it at the bottom of its
performance cycle. I have picked up a few shares
last two weeks, but I doubt I'll buy more unless it
completely bombs out and yet remains a viable
Not to rain on anyones parade but the fact that
this company is selling around "book value" is
meaningless because in a capital intensive industry the odds
that a company can sell its assets at the carrying
price is ludicrous. So I hope nobody is buying on that
info alone. Also, I am new to following this stock and
have read many messages regarding future price but no
reasons as to why it should be valued higher then it is.
Please back up your opinions with reasons otherwise your
I hope this doesnt offend
Having worked on cars for many years, I have to
agree that TKR is the best bearing going. Everyone I
know who works on machinery knows the difference and
demands Timken. I can't believe that it's selling at
these levels as last time I looked it was over $40! And
like you said, with a nice dividend. I'll soon be
adding it to my modest, but well thought out, portfolio.
Good luck all. Keep rolling TKR (sorry for the pun).
timken has already won a product dumping trade
agreement against japan quite some time ago..I dont think
this is nothing to worry about..besides no one can
match the quality of timkens steel.timkens quality
standards are unmatched in todays market.how many timken
bearings have you seen go bad under normal
conditions.....we are the best!!!!!!
I am finally giving in and putting in a buy order
tomorrow for some Timken stock - I always keep my eye on
it, but most of my investments are in technology and
retail, because I feel U.S. based heavy industries are in
their sunset years. BUT - at a PE of 6.5 (based on
today's price) I can't pass it up. I have NEVER seen a pe
this low - and a dividend!
Question: with the
international meltdown of Asia, Latin America, won't those
countries flood the market with cheaper steel? The basic
problem in Korea, Japan, etc. is overcapacity, and Japan
steel companies are going into bankruptcy. Won't Timken
be impacted by "steel dumping?" What is the worst
Timken managemnt is agressive, and will be doing
aggressive measures to get this stock back to the upper
thirties buy years end. They are extremely solvent, booked
through next year, end nothing but good things are
happening for the company. My prediction, as for the many
who work there. Buy, sit, and smile.