REPOST FOR NEWBIES: Here are the latest multiples for similar industry players (from S&P CIQ)
Mean Comp. Multiples:
TEV/Revenues (LTM):6.3x
TEV/EBITDA (LTM): 28.2x
TEV/EBIT (LTM): 23.1x
P/E: 32x
TEV/Forward Revenue (NTM): 5.82x
Obviously these multiples should be discounted to take into account the higher risk, smaller size and lower liquidity of TPNL (since the Comp list does include a long list with some of the bigger guys in the payment processing space a few of the comps included are: AMEX, VISA, MC, GPN, PLPM, CCN, VPY, WEX, CASS, etc...)
I remember doing some research on this space last year and most takeovers were occurring at 5-10x multiples on revenue. I personally prefer EBITDA multiples as a good proxy for valuing companies.
If we use the approximate EBITDA this Q of ~650k annualized*4=2.6M
Than Apply 15x multiple to be conservative (15*2.6M)=39M/43M shares= 0.91 cents or if you wanted to bump it up to 20 times (still well below most comps) it would give us (15*2.6M=52M/43M shares= $1.21 per share.
Otherwise, using a revenue multiple of 4 times to be conservative using 2.86M*4=11.25M *4x=45M/43M shares would give us $ 1.05 per share. (which is quite reasonable given most takeovers have been recorded at 5-10x revenue.
Finally using a P/E ratio, The company can realistically hit 0.05 eps/yr if not more if we see good growth (Q4 is typically strong).
Applying a 15x multiple (about a 50% discount to current mean multiples) would place the stock at 0.75$/ share. I think a 15x P/E is quite realistic given the multiples that are currently in the card payment processing space.
Its always good to use multiple valuation methods but as you can see, using conservative/reasonable metrics it would not be out of the realm of possibilities to see this stock trade over 50 cents or even towards 1$. Obviously these valuations include only the current company data if the Company lands any bigger contracts or expands in any material way the upside could change drastically.
I am holding long and strong well into 2017 to see how this materializes itself.
