Fish,
While I always appreciate your perspective, I respectfully disagree with your most recent post. Before I explain why, I will point out that I am highly fallible, subject to my own biases, and far from neutrally objective, so please take my thoughts with a grain of salt.
When I invest in a company, I think of myself as being a long-term part owner in the underlying business. I am not trading, speculating in pieces of paper, or timing the market. And, even if I were, I'd likely not be successful. Why? Because I'm not that smart, nimble, or energetic. I spend large chunks of my day trying to keep up with two very attention-seeking and inquisitive young kids, aged 5 and 2, respectively. I am generally sleep-deprived (and likely short on brain cells), and running to stand-still. There aren't nearly enough hours in the day.
Because I'm thinking as a slow-footed, long-term part owner, I'm not trying to artfully promote my holding to the marginal buyer of the stock. As in poker, I believe that "cards speak." I'm sure you've heard the Graham aphorism about the market being a voting machine in the short run and a weighing machine in the long run.
In the long run, all that I care about as an owner, is the ability of my business to generate as much cash flow as it can in relation to the inputs of capital required to operate. This may sound shocking, but I'm not at all concerned with the growth rate of the company's revenues. I'm only concerned with the growth rate of the company's cash flows. And, to me, even the growth rate of the company's cash flows is secondary to the relationship between cash flows and capital input (a.k.a. "invested capital).
Let's bring this back to EVSNF. In 2016, the company appears to have generated over $1 million of cash flows in 9 months. How can we determine this number without a statement of cash flows? The answer lies in the balance sheet. Over the past 9 months, cash on the balance sheet has grown by $0.5M Meanwhile, debt on the balance sheet has fallen by $0.5M. There can only be two sources of this funding -- equity financing or cash flow from operations. I think it's fair to rule out the former because diluted shares at the beginning of the year were 93.4M and now sit at 93.7M. (I may be mistaken, but I believe that the exercise of warrants into 7.7M shares actually occurred in calendar 2015 given that the Jan 6, 2016 press release indicates there being $3.2M in cash on the balance sheet as a result of the exercise and the last 20-F shows $3.3M in cash on the balance sheet at the end of 2015.)
Conversely, we know that earnings over the first 9 months have been $1.6M. We also know that EVSNF's depreciation is negligible. The balance sheet shows that non-cash current assets are up $270K (negative cash impact) and non-debt current liabilities are down $130k (negative cash impact). So, that seems to generally sanity check the $1M figure above.
How much capital did EVSNF require to generate the $1M of cash flow from above? Non-cash assets on the balance sheet sit at $3.7M and non-debt current liabilities sit at $1.8M. The difference between these two numbers is my measure of invested capital (since I generally don't mind small companies hoarding cash on their balance sheets). So, it took EVSNF $1.9M of capital to generate $1M of cash flow in 9 months. That's a 53% cash return on invested capital in 9 months (70% annualized).
And how richly valued is this company that seemingly generates a 70% annualized cash return on investment. If my numbers are right, the company's enterprise value is roughly 14x its free cash flows. To my eyes, that 70% cash return on investment doesn't seem to be baked into the valuation.
So, rather than excoriating my business partner, Sam Cohen (he of the $200k annual salary and 17% equity stake) for decisions made in the past year vis a vis iBar, I'd tell him to just keep doing what he's doing. I can very much live with my company treading water with a 70% cash return on investment while waiting for a new product to ramp with customers.
As always, I welcome your thoughts and, especially, any strong objections.
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