DeMarche Corporate Uses of Cash Study

Cash usage a topic of intense interest to investors.  U.S. companies are stockpiling cash at record levels. Industrial companies within the S&P 500 index (i.e., excluding financial companies), have the highest dollar amount since 1988.

DeMarche Associates embarked upon a study in early 2005 of how companies tend to use their cash in general and how well these strategies have paid off in terms of subsequent stock returns and company valuations. The DeMarche Corporate Uses of Cash Study is a unique body of research in that there have been academic or practitioner studies that have addressed this topic by examining all of the most popular uses of corporate cash together over long time periods. Past studies have tended to look at future returns associated with one or two of the major cash usage categories over time periods spanning a decade or less. DeMarche extended this body of research by examining subsequent stock performance over a 17 year time period spanning from 1990 – 2006. In addition, DeMarche looked at the effectiveness of the major uses of cash by sector/industry differing market cap sizes and stock styles to see whether or not these important drivers of stock price made a difference. Please take a look at our free downloadable white paper that summarizes our main findings.

Our subscription service provides you with dynamic access to the returns of more than 5,000 stocks differentiated by the foregoing factors.  Subsequent one, three, and five year returns of five different uses of cash are in the database.  The five uses of cash studies are: stock buy-back programs, dividend changes, mergers and acquisitions, research and development investments, and capital expenditure outlays. Additionally, you will receive the 2008 update when it covering the period 1990 – 2007 when it becomes available in the Summer of 2008.

In addition to analysis of subsequent returns, two other major sections of the study address various descriptive statistics on our database and results on how different uses of cash are related to changes in Forward Price-to-Earnings (FPE) valuations.

So, whether your firm is evolving strategic planning efforts in the cash utilization area, prioritizing projects for internal funding, or balancing cash investments between internal and external stakeholder needs, DeMarche Corporate Uses of Cash Databasewill provide you with invaluable information to understand stock return and valuation ramifications of your cash deployment choices.