Thursday, April 20, 2017 9:35:30 PM
As you can tell from my comments on the other site, my criticism has primarily been focused on Stover. Perhaps I'm being slightly unfair, but I do believe he's done shareholders a disservice by giving away stock at such low valuation levels. The problem now is that there's about 10mm shares including options and warrants. I don't give the company much credit for the cash on the balance sheet as the company is cash flow negative.
I also had a problem with Q4 and repeatedly tried to educate people through my posts. There were a number of posters on the other site extolling the virtues of that quarter given the reported positive EPS. For anyone with a basic understanding of accounting, they would have realized it was a bad quarter and the positive EPS was only due to an accounting gimmick. Revenue growth decelerated dramatically, operating losses widened and cash flow was steeply negative. I think Stover knew he had a bad quarter to report and he rushed to get a bunch of offerings done at higher prices. Perhaps this was smart on his part, but he's alienated a lot of institutional investors (and there aren't that many that will traffic in a name like this given the small market cap). I think that's one of the reasons why the stock can't hold any gains on "positive" PRs anymore.
At the current valuation, it's trading at about 2x trailing sales (again, I don't give them credit for the excess cash nor do I believe the market will either). That's not cheap for a company with negative operating EPS (excluding all of the gimmicks) and negative cash flow. Let's say that he can grow revenues 50% this year. That puts the company at $20mm in revenue. Put a 3x multiple on that and it's a $60mm market cap. That equates to about $6/share in an upside scenario. Keep in mind, he only grew revenues in the low 20s in Q4, so 50% would be a sharp acceleration. Certainly plausible given Aetna and UNH, but far from certain. Just because those insurers cover the tests doesn't mean that doctors will order the tests.
In short, the problem for the stock is that he's diluted the stock so enormously that it will take a huge amount of revenue growth to generate upside. Moreover, it's highly likely that he will have to raise more equity to achieve the revenue growth I'm suggesting given insurers are notorious for beating up suppliers like this with extended payment terms (see what's happened to companies like ADPT recently).
Where could I be wrong? Well, he could boost profitability more than I expect. That said, with 10mm shares outstanding, net income is being amortized over a much bigger base now.
I am watching the stock. I think it's merely a trading vehicle...fine to buy in the low $2s and sell in the low $4s. Rinse and repeat.
Let me know your thoughts when you get a chance..
Renegades17
Recent IDXG News
- Form 8-K - Current report • Edgar (US Regulatory) • 05/09/2024 08:29:42 PM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/12/2024 10:01:48 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/06/2024 11:33:32 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 12/12/2023 09:05:24 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 11/16/2023 09:05:29 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 11/08/2023 10:14:32 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 11/08/2023 09:16:06 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 10/27/2023 08:05:18 PM
- Form DEFA14A - Additional definitive proxy soliciting materials and Rule 14(a)(12) material • Edgar (US Regulatory) • 09/22/2023 08:53:38 PM
- Form DEF 14A - Other definitive proxy statements • Edgar (US Regulatory) • 09/22/2023 08:20:11 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/09/2023 07:47:52 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 08/09/2023 05:27:44 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/01/2023 09:24:47 PM
FEATURED POET Announces Design Win and Collaboration with Foxconn Interconnect Technology for High-speed AI Systems • May 14, 2024 10:09 AM
FEATURED Element79 Gold Corp Reports Exceptionally High-Grade Results from Lucero • May 14, 2024 7:00 AM
VAYK Added New Manager for Expansion into $64 Billion Domestic Short-term Rental Market • VAYK • May 14, 2024 9:00 AM
Avant Technologies Equipping AI-Managed Data Center with High Performance Computing Systems • AVAI • May 10, 2024 8:00 AM
VAYK Discloses Strategic Conversation on Potential Acquisition of $4 Million Home Service Business • VAYK • May 9, 2024 9:00 AM
Bantec's Howco Awarded $4.19 Million Dollar U.S. Department of Defense Contract • BANT • May 8, 2024 10:00 AM