Paysign Inc (PAYS)

[ebrie014]

Q1-2017 Updated - Valuation over the next Fiscal Year under different methods:


- Overall a very good quarter, especially with Q1 which is seasonally weaker. It is great to see this strong growth in revenue/card holders and best of all no more debt or legal payments!
I've updated my assumptions based on this quarter. I've kept GM% at 45% given Q1 is seasonally lower and I believe it will likely normalize. I think we will continue to see great growth from the company going forward. It is especially interesting that they note SG&A as being "high"- I actually did not see it as that high (but used the Q1 ratio of SG&A% of revenue as a proxy - if it goes lower all the better). Trading multiples, for the most part, have climbed in the sector (as seen below). I honestly would not be surprised to see this trade between 1.25 to 2$ over the next year. If this trend continues into 2018 we will definitely be in for a wild ride!


Current Fiscal Year growth in revenue: 45% ~15M in 2017
Gross margins: 45% ~6.8M
SG&A as a % of revenue 25% ~ 3.77M
D&A and other: 861k (current Q*4)
EBITDA:3.02M
NI:2.16M
F.d. share Count: 44.1M
Assumed cash balance in 12 months:~3M$ (1.6M currently plus a conservative additive cash flow of 1.4M given no debt and no legal pmts over next 3Q's)
Assumed LT debt:0$
**all multiples come from S&P capitalIQ from companies in a similar industry.


Method 1 - EV/Sales:

Mean EV/Sales Multiple:7.8x (or median of 5.2x)

15M*7.8=EV of 117.8M add back cash less debt=equity value of 120.8M/44M shares gives a share value of 2.74$/share (or 1.85$/share using the median)


Method 2 - EV/EBITDA:

Mean EV/EBITDA Multiple:17.6x

3M*17.6=EV of 53.1M add back cash less debt=56.2M/44M= 1.27$ per share


Method 3 - EV/Earnings (or P/E):

Believe it or not the average P/E in this sector has jumped to 45x! - I'll continue using 25x to be extra conservative

NI of 2.1M*x25=54M EV add cash = 57M/44M shares= 1.29$/share
*note this expects the next quarters to be stronger than Q1 - which is typically the trend. (however the multiple is already deeply discounted which makes the target price per share conservative)


Best of luck!

E.