The Cheapest Stock I've Ever Seen
Too Good To Be True?
I’ve been scrolling page after page of the OTCMarkets.com website as usual to see what stocks are looking cheap. I’ll check in on some companies that I’d passed by before to see if they’ve become a more attractive investment candidate.
Every so often, I come across a company I’ve somehow overlooked—one that never quite caught my attention despite repeated passes. Other times, I find a business so compelling at first glance that I have to resist the urge to buy on impulse and remind myself to dig deeper first.
One pattern I frequently notice is companies trading with enterprise values below their market cap. Since EV reflects the total cost to acquire a company—factoring in debt and subtracting cash—it offers a more complete picture of what you're actually paying. It’s one of the most useful tools for identifying undervalued opportunities.
If you were to buy a publicly traded company, you'd need to purchase all of its outstanding shares—this is its market capitalization. However, owning the company also means assuming responsibility for its existing debt. Therefore, to determine the true cost of acquiring the business, you must add the company’s debt to its market cap, since you’d be liable for both the equity and the debt obligations.
On the flip side, when acquiring a company, you also take ownership of the cash on its balance sheet. This cash reduces the total cost of acquisition, so it's subtracted from the combined value of the market cap and debt. The result is known as the company’s enterprise value (EV).
I typically use EV as a key metric to gauge how cheap a stock is. If a company’s EV is meaningfully lower than its market cap, it’s often worth a deeper look.
In rare cases, a company may even have a negative EV—meaning you'd effectively be paid to take ownership. These opportunities are extremely rare, so when one appears, it's critical to act quickly. That’s why I was stunned—and admittedly, a bit giddy—when I discovered a company trading with an EV of negative $24 million.