INSPECT earnings estimate for discussion
During the last webcast Mark Cola was asked in the Q&A, "How much will the INSPECT module sell for?" The response was “Mark Cola: Regarding pricing, we are of course structuring our pricing around value based not cost based models and expect there will be both a hardware and a software price component." Based on some assumptions a ballpark earnings estimate can be made. My projections are below. How would you change these assumptions?
Importantly, these projections are revenue generated only from producing LEAP engine nozzles for GE Aviation. It includes no projections for 1) other parts that Sigma contributes to for GE Aviation, or 2) any other customers. Consequently, these projections could easily double or more.
What these figures tell me is that:
a. The potential everyone thinks is possible for Sigma is supported by these estimates
b. Don't necessarily expect $1.00 plus share price because even with double these projections it would be still not be supported unless the estimated P/E of 30 is too low.
c. Sigma will need to expand rapidly to service this amount of business so it is important that they assemble a good executive team to grow the organization.
Value of Nozzles for Engines (5 years)
Engine Orders 5,500 (press release May 2013 plus 500)
Revenue per engine (mil.$) 70
Total engine revenues (mil.$)385,000
Nozzle portion 1.0%
Nozzle value (mil.$) 3,850
INSPECT revenue with value pricing using 5%
Savings 25%
Savings (mil.$) 1,283
SGLB % 5.0%
Revenue (mil.$) 64.2
Revenue/Earnings B.O. | Rev. portion| Revenue (mil.) | Earnings (mil.) @ 50% | share price @ 30 P/E
2014 | - | - | -
2015 | 10.0% | 06.4 | 3.2| $0.1683
2016 | 15.0% | 09.6 | 4.8| $0.2525
2017 | 20.0% | 12.8 | 6.4| $0.3367
2018 | 27.5% | 17.6 | 8.8| $0.4629
2019 | 27.5% | 17.6 | 8.8| $0.4629
Current Market Cap
Float Shares 571,800,000
Current PPS $0.11
Market Cap (mil.$) 62.9
