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Mr Market has largely given up hope with N Brown (LSE:BWNG). He has pushed it share price down to half its level of 2014, making its ten-year cyclically adjusted price earnings ratio about 11.
While earnings per share over that period have been on a downward trend I thought it might be interesting to examine whether it has been generating satisfactory levels of return on capital.
Are the managers employing the capital shareholders have left with them effectively? If they have achieved suitably high returns over this period of business transition – both in terms of executive team and the transition to online selling as opposed to catalogue – then we can feel more reassured about the backstop position, and still hold out hope for a revival of earnings per share.
For this analysis I’ll use income after tax and after deduction for exceptionals. I’ll add the amount that has been written off for amortisation of intangibles that year.
This is divided by net tangible assets, calculated after deduction of all liabilities and the deduction of the intangible assets in the balance sheet.
| £m | Net income plus amortisation (exceptionals deducted) | Net tangible assets | Return on net tangible assets |
| 2017 | 65.0 | 336.3 | 19.3 |
| 2016 | 73.5 | 351.1 | 20.9
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