I like ZipCar but they don’t offer any cars with standard transmissions and the prior borrower almost always never leaves any gas in the thing.
This is probably not the definitive source of anything, but according to this website competition is heating up. Does anyone know how long ZIP is locked into its contracts for rental locations?
I love reading your posts, reading this one brought up an important question for me, when investers are using a tangible bv multiple to assess the relative value of a company what yardstick are they measuring it by. I assume comparable multiples vary amongst industries, is this true? Where do you find comparables for industries?
Thanks for the nice comment. Glad people read my wall-of-text posts.
Multples vary by industry, yes, but not as much as something like p/e or some other metrics. P/Es can also get fantastically distorted via one-time charges or a bad couple of quarters, so they bounce around a lot. One of the reasons that most value investors like P/tangible book is that it’s much more clear what you’re getting, and the metric will change over time much more slowly. P/Es can get hugely varied - some terrible companies out there deserve low single-digit multiples, and others deserve ones that are well in excess of 20 or even 30. So it’s possible that you’d have P/Es that are orders of magnitudes different [i.e. one company has a p/e of 3 and another, 30]. Price / tangible book doesn’t seem to vary that much - typically, you’ll find that price to tangible book stays in a narrow range of somewhere from 0.5x up to maybe like 2 or 3x? If it’s lower than that, you may be looking at a business in serious trouble, and if it’s higher than that, then it’s probably a business with some kind of competitive advantage that you haven’t factored in, in which case P/tgbl book may not be the best metric for it.
Comparable multiples vary among industries - yes, but it’s not as wide a spread as you’d think. Firstly, BV is usually far slower to change. Secondly, if you’re bothering doing the p/tangible book ratio, it’s because it’s a business where the tangible assets matter - if the company wants to grow past a certain point, they’re going to need to add capital. That’s not quite the case with Google, or Facebook, or Microsoft - these companies realize huge growth with very, very little additional capital. However, business like cement, or ball bearings, or copper wire, or whatever - these are almost always lower-return, capital intensive, plain-old-boring businesses that a lot of value investors end up looking at, and the amount of tangible assets that the company has to their name (and their condition!) matter.
Where do I get my comparables - I go and I hand pick comparables, and then I compute the numbers myself, in spreadsheets. Seriously. I know you can get info from bloomberg and factset, but I’ve had terrible experiences trusting the “comparable company metrics” from Bloomberg. I work in the small and microcap universe and most of our companies are extremely specialized. I will sometimes punch one up and see who bloomberg lists as comparables and I’m just blown away at how “off” the competitors they list are. So yeah, I typically wait until I’ve done some of my research, and then I decide who the “true” comparables are, and then I’ll go and put together my excel stuff around the 3-10 companies who are in similar lines of business.
I use a zipcar competitor called Car2Go. I live in Austin, which was their second city to launch into. We have zipcar here too, but I’ve never used it.
Car2go is basically a bunch of SMART cars scattered around the city. If you’re within a 15 mile radius of downtown, there is one within a quarter mile walk of where you are. You can track them on your smartphone and they are easily identifiable because they are all blue and white. I absolutely love the service, and I actually own a car. I can drive one downtown for about $6, and park it for free in one of the designated parking spots. There are gas cards in the car in case you need to fill up. I paid $25 to sign up for the service, and other than that I just pay when I use it.
Its definately a service for quick trips or the spontaneous ride. There isn’t much of a public transportation system to compete with it here. I think this business model works very well, and as far as I can tell, they’ve been experiencing some good organic growth beacuse they’ve added to their fleet and spread to other cities around the world.
Zipcar seems like more of a rental service. I have no idea where or how you pick up a car, but one thing they’ve missed is having the cars be easily identifiable. I see a tiny logo on a random Toyota every now and then, but I wouldn’t know the difference between it and any other car. Seems like zipcar requires some planning and you can’t just randomly decide to pay $5 for a quick ride.
Just curious. I’ve always liked the P/BV multiple (tangible BV) for making comparisons, but only if the book value is not based on historical cost. For businesses with quickly depreciating assets, I’d guess that the BVs are closer to their MVs than those with longer average lives.
But I just don’t feel I know enough to do the adjustments for replacement cost vs. historical cost. How do you guys go about doing the adjustments? Do you just assume that historical cost is close enough? Do you just know your industry so well that you can figure it out? Is there some other way?
I think, and I may be out to lunch on this, the beauty of using historical cost BV for a company which decides to be more aggressive in the selection of their depreciation method is that the understated book values relative to MV or RC adds more of a margin of safety in a value investors assessment of the value of the company.
As for calculating the actual replacement cost and doing the adjustment, I have no idea and wish I knew myself. I am looking at a company that IPO’ed as an income trust in 2003 and blew up during the housing crash (its steel fabricator that sells fasteners for residential construction) The equity of the operating company is slowly being eroded and it will require another round of recapitalization again, if they decide to continue operating. The thing that intriques me is that the market cap is only around 6 million dollars and I can see the land one of their factories sits on from my apartment, its prime waterfront property. Under it’s current industrial zoning it would be worth 1-2 million an acre, but if they rezoned it high rise residential it would be a multiple of that and the factory is surrounded by multifamily residential, commercial on both sides of it. I just have no way of determining what an appropraite adjustment to the land value is, they bought the property in the 1960’s.
i don’t use BV unless its for insurers and banks…
I just got back from a road trip across Texas (no zipcar, but I did rent a sick Mustang convertible for the drive). IMO Austin is one of the best cities in America – definitely in my top 3. I’m very jealous you live there. I stayed at the W Hotel on 2nd Street – fantastic area. Would move in a second if I could get a good finance job there.
Historical cost is the most common reporting method for public companies. Rarely do I see market value assessments. You are correct in stating that one of the key questions is whether the deprecation rate is fair / accurate.
The answer to your question is fairly simple but the actual execution to derive sensible numbers is difficult.
Approach 1: You can call the company, hope management is honest, and make a back of the envelope determination of market value vs. cost and then try to support that with some light industry research / common sense. If there is a wide delta, you may have a decent long.
Approach 2: You can do extensive industry work including talking with suppliers, etc. to become an expert and understand the specific economics of the items within each line item (assuming you can get a break down from the company or the buckets are fairly self explanatory) and do a bottom up build out that way estimating fair value.
Either way, the only thing you know for sure is that your estimates will not be exact and may be off significantly. I would think you need a 50%+ discount from NAV to want to get involved in some kind of scenario like that to account for estimate error. It’s not my cup of tea due to the propensity for dishonest from management (rampant in smaller cap names where you are likely to encounter such a scenario), but I have seen successful investments made this way. It’s hard to execute on that line of questioning because you sound like a “private equity guy” and management tends to get a little nervous with such questions unless they know you well.
RAGING mother fuckers on the short side.
Basically, this: http://www.youtube.com/watch?v=rY0WxgSXdEE (safe for work)
I feel smart! Hooray! How’d you do on this trade, and are you covering at all yet?
Edit: Also, nice tune.
I’ve been on the phone all morning and have not really looked at the company’s report / conference call yet, but my impression is that it may have further to go. If growth is slowing and they are burning cash with a broken business model that can’t be good for the equity. As I wrote above, some analysts have crazy projections out to 2018 (yes, eighteen) and will be revising down – no question the party is over now on the momentum side (stock got stuck in the $10-11 range as people were buying hoping for the growth to re-accelerate). Generally when the growth breaks, it takes time to sort out the new ownership structure, putting downward pressure on the stock beyond the initial gap down.
I’ve had a lot of success shorting growth companies with unsustainable business models that have crazy long projections in place (2018, really?). I shorted BEAT a few years ago around low 30s when management was lying to the Street (they had crazy 3 year out numbers for an emerging medtech product – lol). I wish I had found ZIP earlier.
Nice glad I avoided this, thanks to your skepticism.
Can they be taken out at this price?
Who would buy them? Hertz?
Is anyone still following this stock? I closed out after Q3 when the stock gapped up. Made about 45% pre-borrow on the trade.
This article struck me as pretty subversive to shareholders for a company that has consistently burned cash over time and has a promotional CEO.
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“The new office, located at 35 Thomson Place in the Fort Point district of South Boston, will encompass all six floors of the 46,000 square foot building. In keeping with Zipcar’s core values, the new office will be designed for energy efficiency and sustainability, will embrace a high performance workspace strategy with an open floor plan to help promote collaboration and will have Zipcar car sharing spaces outside. The new location is a short walk to a nearby Silver Line stop and in close proximity to a newly installed Hubway bike sharing station.”
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I mean if that doesn’t make you want to punch Scott Griffith in the face, I don’t know what would.
Up 50 percent today on a buyout.
Even with it being up 50%, it’s still down about -9% from 1 year ago. It’s still down about -30% from it’s IPO price of $18 back in April 11’. If you bought this stock prior to Aug. 12’; there is nothing to celebrate; this has been a dog of a stock.
Close. Avis
Man, I should have gone with this trading idea. Fing Bromion talked me out of it.