Question

Resources for valuing a company with positive earnings but negative equity.

Answer 1

Only the book value of equity can be negative and since it is not really an input into valuation, it is irrelevant. So, value this company exactly the way you would value any other company.

Answer 2

if negative equity, can there be a negative capital, aswath? if so, how do you forecast growth (if return on capital is negative), that goes into valuation?

Answer 3

If you have negative equity(frequent) or capital (much more infrequent), your firm is not in steady state and using the ROC* Reinvestment rate to estimate growth is not a good idea. I would suggest forecasting revenues first, estimating margins and using the sales/capital ratio to estimate reinvestment. Keep track of the ROC. As your firm makes reinvestments, the invested capital will grow from a negative to a positive number... and you may be able to revert back to the steady state growth formula at some point in time.