The Facts about the Financial Results
As a long time holder I have gotten use to these up and downs in the company's stock and its earnings. I find the results to be mediocre but on the positive side i'm happy because it resets the bar to a normalized level.
To all new or old holders the 2014 Q4 results should not be used as a baseline as many projects had come to an end that quarter (some substantially large ones) and since the company has to recognize the revenue at the end as it signifies completion it significantly inflated 2014FY and Q4 compare to what the company would "typically" do. It also inflated gross margins as the company had incurred most of the expenses for these projects earlier on.
The Positives:
- From conversations I have had and from the results I have seen the company's main revenue stream and focus is the plasma donation centers which is growing (79 to 91 this year and expected to continue to grow further). This is a high growth industry as plasma centers are on the rise in the US and 3Pea's clients themselves are growing which means more revenue for 3Pea (plus many potential new clients to add). I like this revenue stream. Its consistent and predictable and we won't see many of these big yoyo swings in revenues. In my opinion, the company should focus lots of attention on this revenue stream as its worth more, company's with predictable earnings streams trade at higher multiples.
-I took a look at the CAGR(cumulative avg growth rate) from 2011 to 2015 and we are still sitting at 25% (3.3M,6.7M,6.308M,10.293M,8.108M). Similarly, gross income CAGR sits at 47% ( 0.87 1.395 2.204 5.638 4.088). I'd rather look at this as it normalizes the growth.
- Gross margins are trending nicely (back out the artificially high one from last year e are looking pretty good)==> (2012:20.82%; 2013:34.94%; 2014:54.78%; 2015:50.42%)
- Q4 was profitable by a sliver. Here are some stats for the Q4: 2.16M rev, 1.1M Gross income, SG&A was slightly lower than last years Q4 at 0.87M (vs 1M in Q4 2014), operating income of 0.079M.
- Lawsuit is out of the way and was fully taken as a hit to 2015FY (if it was not for that it pretty much would have been an ok year with no loss as it was mainly the legal settlement and fees that hurt both the Cash flow and income statement.
- Valuation is ridiculous: at 42M F/d share float and 0.19$ price the whole company is valued at 8M$ which is less than what they earned in relatively predictable revenue this year which I expect will grow. Sure they are not issuing tons of press releases but they are working on growing the business - they were at the plasma conference in Barcelona - I would take that as they are working hard at expanding within the Plasma segment. shares are trading at barebone valuations because of people's hopes for a quick pop on a Q4 but this is still a developing story - it takes time but this is one catalyst away from a major pop which could really be anything - a new big plasma client, an approval to start business in Europe or some bigger company in the sector that wants to take them out because of how dirt cheap it would be.
I feel 2016 will be a much better year, best of luck to all!
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