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Subject:  Re: NFSC 2012 – Eros Int (EROS) – In Date:  23/02/2012  12:34
Author:  CantEatValue Number:  136660 of 149787

I'm surprised there has been no further comment on this share as it's quite an interesting case and has garnered a lot of recs. The story looks good, the profits look good and the potential looks even better.

However, I'm now going to argue that not everything is as rosy as it currently seems. I'm a bit old fashioned in that I think the value of a business is the present value of the future cash flows it can generate. EROS, as it currently stands, does not generate any cash flow. It burns cash at a pretty sizeable rate and has done for the past five years.

So why then is it churning out such impressive profit growth? If I had to title this post, it would be 'Not all earnings are worth the same'. Investors would be well served by paying more attention to the cash flow statement to understand what's happening to their money.

All the 'profits' of the last five years have just been due to a gigantic build up in intangibles, my least favourite asset. If the accounting were to be more conserva