Elite Pharmaceuticals Inc (ELTP)

[no2koolaid]

Actually, there are the revenues Elite has generated and these are important because they are absent from many pharma/biotechs that are touted as the next big thing. And, then there is the potential Elite could act as a contract manufacturer as a means to garner future revenues. But, because capacity utilization limits strategic choices, the real future for Elite and its shareholders is the commercialization of their pipeline.

And, when considering the value of a firm there is not only the intellectual capital Elite possesses that outsiders cannot calculate and would be part of the goodwill consideration, but Elite has actual facilities that produce and store stuff...specifically, the multi-million dollar facilities that will allow them to reduce their product costs and thereby offer competitive price-value to customers. Utilizing a cost strategy makes this a synergistic value.

Should the concept of goodwill be foreign to the reader, I would offer a link to inform...https://en.wikipedia.org/wiki/Goodwill_(accounting)

Here is a notable point made in the link that offers context for investors in Elite...

For example, a privately held software company may have net assets (consisting primarily of miscellaneous equipment and/or property, and assuming no debt) valued at $1 million, but the company's overall value (including customers and intellectual capital) is valued at $10 million. Anybody buying that company would book $10 million in total assets acquired, comprising $1 million physical assets and $9 million in other intangible assets. And any consideration paid in excess of $10 million shall be considered as goodwill. In a private company, goodwill has no predetermined value prior to the acquisition.

This example should also help clear up the misconception about valuing a firm...the p/s is NOT a factor in any equation involving M&A. It merely is the context for understanding value. Many a high p/s company has been deemed not worth the value in an acquisition negotiation. Here is a link for that...http://www.streetofwalls.com/finance-training-courses/investment-banking-technical-training/mna-valuation-techniques/