Covalon Technology Limited (COV)

[solarity]

Great post from TheRock07 on another board:

"Illustrative Net earnings at $15 US sales
$15 million US in sales will probably be achieved without the recent mega deal with the US's largest private healthcare technology provider.

Several contracts were recently signed which should lead to a rapid expansion of sales outside the US and EU.

Those are the two largest healthcare regions of the world.

So, lets take $15 million US in sales as being certainly achievable over the next 4 quarters..

Thats about $20 million cad or about 3 times the annualized 2016 sales todate.

Gross margins at very modest sales are already 65 %.

As sales expand, economies of scale will move gross margin upwards.

I shall use GM=70 %.

That is, operating earnings from $20 million cad in sales will be about $14 million.

Annualized operating costs are about $5.5 million in 2016 todate.

I will boost this by 30 % which should easily account for expanded G & A @ $20 million in sales.

So, total operating costs will be about $ 7 million which means that Ebitda will be about $ 7 million or about $0.35 per share.

COV have tax loss pools to protect early profits but lets assume that they pay the full income tax of 26 %.

The computations are elementary.

Net earnings will be about $5.5 million cad or about $0.26 per fd share.

If you check out healthcare technology/device ETFs, you will find that they trade over 30 times net earnings.

With a pristine balance sheet without debt, COV should qualify for at least 20 times net earnings, if not higher.

This implies a realistic fair value above $5 per fd share @ very achievable annual sales of $20 million cad.

My own view is that within 2 years, Covalon will have annual sales several multiples hgher than $20 million.

Hence the magnificant upside here for the astute investor who buys and holds for the next 2 years..

Illustrative Net earnings at $15 US sales
$15 million US in sales will probably be achieved without the recent mega deal with the US's largest private healthcare technology provider.

Several contracts were recently signed which should lead to a rapid expansion of sales outside the US and EU.

Those are the two largest healthcare regions of the world.

So, lets take $15 million US in sales as being certainly achievable over the next 4 quarters..

Thats about $20 million cad or about 3 times the annualized 2016 sales todate.

Gross margins at very modest sales are already 65 %.

As sales expand, economies of scale will move gross margin upwards.

I shall use GM=70 %.

That is, operating earnings from $20 million cad in sales will be about $14 million.

Annualized operating costs are about $5.5 million in 2016 todate.

I will boost this by 30 % which should easily account for expanded G & A @ $20 million in sales.

So, total operating costs will be about $ 7 million which means that Ebitda will be about $ 7 million or about $0.35 per share.

COV have tax loss pools to protect early profits but lets assume that they pay the full income tax of 26 %.

The computations are elementary.

Net earnings will be about $5.5 million cad or about $0.26 per fd share.

If you check out healthcare technology/device ETFs, you will find that they trade over 30 times net earnings.

With a pristine balance sheet without debt, COV should qualify for at least 20 times net earnings, if not higher.

This implies a realistic fair value above $5 per fd share @ very achievable annual sales of $20 million cad.

My own view is that within 2 years, Covalon will have annual sales several multiples hgher than $20 million.

Hence the magnificant upside here for the astute investor who buys and holds for the next 2 years..

Read more at http://www.stockhouse.com/companies/bullboard/v.cov/covalon-technologies-ltd#Ibr7J2jWEm544puP.99