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Key to add to this STHC Fundamental Valuation...

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stervc Member Level  Sunday, 08/09/20 10:39:18 AM
Re: gdog post# 20250
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Key to add to this STHC Fundamental Valuation...

Respectfully, these thoughts are how I see things. I think first it is important to understand that the Outstanding Shares (OS) is the fundamental denominator that's used to assess the fundamental valuation of a stock and not the Authorized Shares (AS). I'm thinking though that you used 370,000,000 shares as the denominator in your valuation formula/example as the rounded up number of the OS of 369,462,271 shares even though you called it the Authorized. The confirmation of the OS is below within OTC Markets:
https://www.otcmarkets.com/stock/STHC/security

For inquiring minds, the $19 Million in Earnings (EBITDA) was derived from the company's website as indicated within the post below:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=157402706

So...

$19,000,000 ÷ 369,462,271 shares (OS) = .0514

So, I do see where you have derived the value of .05+ per share. However, the problem with that is that the .05+ per share value is basically an Earnings Per Share (EPS) amount. This means that you need to multiply this EPS by the Price to Earnings (P/E) Ratio for the Industry of which it would exist to trade. The PE Ratio is basically the growth rate for a stock for its Industry in which it exists.

Let’s take into consideration the Price to Earnings (P/E) Ratio of 36.92 that's indicated within the link below for the Metals & Mining Industry of which clearly this is what fits for STHC:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html

This means that to derive a fundamental valuation for which STHC should trade within the Metals & Mining Industry, we would need to multiply its EPS by the Price to Earnings (P/E) Ratio for the Metals & Mining Industry to get below:

.0514 EPS x 36.92 PE Ratio = $1.89 per share valuation for STHC

Some might want to go a little conservative to air on the side of caution and consider 15 for a conservative PE Ratio then observe below:

.0514 EPS x 15 Conservative PE Ratio = .771 per share valuation for STHC

With the logic that you posted, you are basically using a PE Ratio of 1 to get your value of .05+ per share of which assumes that there is absolutely no growth within the Metals & Mining Industry which is absolutely not the case. The 36.92 number that is used for the PE Ratio was created from 92 companies that are "profitable" companies within the Metals & Mining Industry as provided within the link above. So, it's actually fair to use 36.92 for the PE Ratio as there is evident growth since so many companies within the Industry are profitable.

This means that STHC should grow at a rate that is the norm for the stocks within its Industry of which it exists based on the positive factors for growth that currently exists.

For those new for understanding what a P/E Ratio is and key dynamics as it is referred to being the growth rate for a stock as it exists within its particular Industry, read the links below that hopefully will help one to see how it's used to assess the fundamental valuation of a stock:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=57154170
http://www.investopedia.com/terms/p/price-earningsratio.asp

To further articulate what I explained above, look at many of the major market stocks such as MSFT, CSCO, QCOM, AAPL, etc. Look at their Earnings Announcements and see how low their EPS is compared to the dollars per share price that those stocks are trading. They trade much higher than their EPS because the market takes into consideration their growth rate for their Industry or their PE Ratio for which they exist. Hopefully this helps more investors to see how such works.

v/r
Sterling


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I never give investing advice; only my beliefs for risks in a stock.
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