It’s Not All Bad for BlackBerry

Be aware of this stat before acting on BlackBerry.

Iain Butler

Chief Investment Advisor, Motley Fool Canada Fool since November 2012 Iain Butler, CFA, is Lead Advisor on Discovery Canada 2017. He is also the Chief Investment Advisor for Motley Fool Canada and is the lead advisor on its flagship Stock Advisor Canada product. Before joining the Fool, Iain was a “buy-side” analyst and through this experience is well-versed in the idiosyncratic ways of the Canadian market. His investing interests are centred on scouring the market for interesting businesses that trade at reasonable prices and offer an appealing risk/reward relationship. Since joining the Fool in 2012, Iain dedicates each day to spreading Foolishness throughout this great country!

Published June 28, 2013 10:17 am EDT

Don’t get me wrong, there’s a lot of ugly in today’s BlackBerry (TSX:BB,NASDAQ:BBRY) release and we’ll get into this in a subsequent post. However, before you go flinging your BlackBerry shares off a cliff, there was at least one bright spot to consider that is unlikely to garner much attention.

In BlackBerry’s fiscal 1^st quarter, the company’s cash position grew from $2.9 billion at the end of the last quarter to $3.1 billion. That’s almost $6.00 per share. In fact, according to Capital IQ, BlackBerry’s pile of cash has never been bigger. This is not a typical characteristic of a company that is facing imminent death.

Contributing to the cash build was BlackBerry’s solid free cash generation in the quarter. With operating cash flow of $630 million and capital expenditures of just $83 million, $547 million of free cash was produced.

And this was not an anomaly. In last year’s first quarter $558 million of free cash was generated and in fiscal 2013, this metric totalled to almost $1.9 billion. Again, such prodigious free cash flow is not an indication of a company for whom the bell tolls.

Given BlackBerry’s market cap is currently about $5.6 billion (and falling by the second), this ability to produce about $2 billion/year in free cash gives it a free cash yield of an almost unheard of 35%.

Foolish Takeaway

You’re going to read a lot of negatives about BlackBerry today, and tomorrow, and probably for some time. But as long as the company keeps pumping out free cash, they’re going to be around – in one form or another. The company may be wounded but at this stage, the wound is not yet life threatening.

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Fool contributor Iain Butler does not own any of the companies mentioned in this report. The Motley Fool has no position in any stocks mentioned at this time.