Hi, can anyone help me with RTHM's balance sheet?
On the face of it, it looks fine with just under $50m NTAV, but this is achieved with a $168m boost of paid in capital from existing shareholders which appears to be a regular occurrence each year.
My initial take is that this should be viewed as optimism on the part of existing shareholders, which might be about to pay off given the increased revenues and forecasts for profit in the next couple of years.
If anyone could explain additional paid in capital in a bit more depth it would be appreciated!
Thanks in advance.
Jamie
You want to investigate the source of the additional paid-in capital on the balance sheet by going to the financing section of the cash flow. In this case it looks like they did a share offering.
What you sometimes see - and the reason I HATE the additional paid-in capital account - is that companies will issue preferred shares. They retire long-term debt, which "improves" their balance sheet, but the preferred shares end up showing up as additional paid-in capital. Looking at that account by itself, you have no way to know if that is additional equity or if the company actually has a new liability that they have cleverly hidden as equity! What accounting needs is a separate paid-in capital account just for things like preferreds that act like liabilities.
Having said all of this, the company you are analyzing looks low-quality:
* No revenue growth
* Inconsistent earnings, that swing from small gains to large losses
* Terrible earnings metrics: ROE, ROA, and ROIC
* Large increases in fixed assets that are not matched by equivalent increases in revenues or earnings
I know nothing about the company or its products. There might be a story that explains the poor financial results.
