A few items on my mind
I think this company has a huge problem with investor relations messaging. I've emailed the CEO about this several times in the past two weeks (akohn@digipwr.com).
Q4 obviously wasn't great, but a lot of the disappointment comes from G&A exploding on a q/q basis. I still don't understand why that happened and the company didn't adequately explain it in the press release (nor the 10-K). The gross margins also came in well below my expectations, which wasn't adequately explained either. The company also stated in the 10-K that the $50mm purchase order will produce meaningful revenue and cash flow in 2017, but operating losses were also likely for the foreseeable future. That makes no sense to me given the company was at breakeven in Q3.
I think the acquisition strategy makes little sense at the current valuation. Raising equity is stupid here as it's prohibitively expensive. They need to focus on near-term profitability to boost the stock price and then they can explore raising equity and doing deals. Trying to embark on a growth by acquisition strategy with a market cap of $6mm is about the silliest thing I've heard in my investing career.
With all that said, I think the stock should be trading at least at 1x revenues, which equates to about $1.60 per share. I could see a higher multiple depending on profitability and the level of organic growth.
I will say that Philou Ventures, the largest shareholder, seems to be determined to grow the business. They also have a vested interest in seeing a higher stock price.
