When cheap isn't that cheap
Only by detecting the traps and adjusting around them can you begin to evaluate a company objectively
SOMETIMES, a stock you come across seems ridiculously cheap.
Why, after excluding a gigantic cash pile, is a toymaker famed for making action figures from a famous cartoon trading at just over two times 2015 earnings?
Or why is a casino stock with a long-term monopoly in an Asian capital, a 40 per cent operating margin, and consistent free cash flow through the years, trading at under seven times 2016 earnings and sporting a 7 per cent dividend yield?
Before you jump in, three gigantic neon-lit words should be flashing in your brain, punctuated by ambulance sirens and music from the scariest horror movies: "It's a trap!"
When encountering number…
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