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Monday, September 08, 2014 8:16:48 PM
Sorry I mis-spoke in my last message. The value associated with a stock's price is measured by its price to earnings ratio. The price to earning s ratio is a number not a dollar amount as I mistakenly stated previously.
For STWA stock to have believable value its price to earnings ratio should be around 10. In technology companies that actually manufacture products, a decent profit margin is considered to be around 50%. So for 540 million shares of STWA stock to have a PE of 10 and presuming its profit margins are around 50% and presuming we need the stock price to stay at around $2.00 per share, then the dollar amount of that first purchase order needs to be what? Let's back calculate. Assume the order is for $540 million dollars. With a profit margin of 50% then our earnings would be $270 million. If we then divide the earnings by the float we get a ratio of 0.5. So with an order of $540 million our P/E ratio is 0.5 with the stock price at $2.00/ share. This would be an unbelievably wonderful P/E ratio.
If the P/E ratio was 10, which is still very good, and we received an order for $540 million the stock price would be at 20 X $2.00 = $40.00 per share.
Please keep in mind this would be the stock price after it had been split 3 to 1. If we did the calculation with the current 180 million shares outstanding then the price of the stock would be at 3 X $40/shr. or $120/shr.
So as a rule of thumb. For every $100 million of order volume our price per share should go up $22.22 dollars/shr. with the current 180 million shares outstanding.
I wouldn't swear by my numbers but I thought I would give it a try.
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