Valuation over the next 12 months under different methods:
As usual, I will give my opinion on valuations. The following is with my own assumptions and includes only the information which we currently know (obviously the upside potential could be more assuming a substantial event occurs that would materially increase growth or vice versa)
I would share my spreadsheet but since its harder to do on this board here are the assumptions used:
Next 12-month growth in revenue: 35% ~14M in 2017
Gross margins: 50% ~ 7.03M
SG&A as a % of revenue 31.5% ~ 4.42M
D&A and other: 600k (close to the current year's amount)
EBITDA:2.601M
NI:2M
F.d. share Count: 43,867,228
Assumed cash balance in 12 months:~3M$ (1.6M currently plus a conservative additive cash flow of 1.4M)
Assumed LT debt:0$
**all multiples come from S&P capitalIQ from companies in a similar industry.
Method 1 - EV/Sales:
Mean EV/Sales Multiple:5.8x
14M*5.8=EV of 81.56M add back cash less debt=equity value of 84.5M/43.8M shares gives a share value of 1.93$/share
This is a typical metric for high growth tech companies and often used for takeover metrics.
Method 2 - EV/EBITDA:
Mean EV/EBITDA Multiple:17.6x
2.6M*17.6=EV of 45.787M add back cash less debt=48.8M/43.8M= 1.11$ per share
Typically a common method used to value companies with stable EBITDA margins and reliable earnings. Often a conservative way of valuing an entity.
Method 3 - EV/Earnings (or P/E):
Believe it or not the average P/E in this sector is around 35x - i'll use 25 x to be extra conservative (check out Visa, MC, GPN, VNTV to name a few)
NI of 2M*x25=50M EV add cash = 53M/43.8M shares= 1.21$/share
As you can see using the mean multiples of the sector, the expected growth, and assumed margins, the valuation ranges from 1.11$/share to 1.93$/share for the next 12 months.We can clearly see that if the company continues to execute like this over the next 3 years the effects would compound and you could easily find yourself with a stock between 3-5$/share. I will re-assess again after Q1 results are released. I am also holding on to all my shares - the story is only starting to unfold.
Best of luck!
E.
